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Gibson's Bodywork does automotive collision work. An insurance agency has determined that the standard time to replace a fender is 2.5 hours (i.e., "standard output" = 0.4 fenders per hour) and is willing to pay Gibson $50 per hour for labor (parts and supplies are billed separately). Gibson pays its workers $35 per hour.
a. Suppose Gibson's workers take 4 hours to replace a fender. What is Gibson's labor hour efficiency? Given Gibson's labor costs, will the company make money on the job?
b. What does Gibson's labor hour efficiency have to be for Gibson to break even on the job? Show your work.
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