s 2023. The US government has passed a new federal minimum wage of $11.00/ hour. It will go into effect on January 1, 2024. Please followthe instructions, given the background information in items A, B, C, and D below. Please follow the Instructions below Q1. Calculate the immediate annual financial impact in 2024 of the increase (change) in hourly wages. This increase will immediately affect the profitability of the company due to the impending increase in the minimum wage. Ignore tax issues such as employment tax in your calculation. Q2. Identify at least three (3) different courses of action (options) for the owner of this company that will offset the increase in labor costs from #1 above. Explain why you thin
It is 2023. The US government has passed a new federal minimum wage of $11.00/ hour. It will go into effect on January 1, 2024. Please followthe instructions, given the background information in items A, B, C, and D below.
Please follow the Instructions below
Q1. Calculate the immediate annual financial impact in 2024 of the increase (change) in hourly wages. This increase will immediately affect the profitability of the company due to the impending increase in the minimum wage. Ignore tax issues such as employment tax in your calculation.
Q2. Identify at least three (3) different courses of action (options) for the owner of this company that will offset the increase in labor costs from #1 above. Explain why you think these options are viable options for the small company. Each course of action must quickly offset the effect of the increase in wages and the decrease in profitability of the company due to the minimum wage increase. If each course of action doesn’t overcome the increase in wages, then it will not meet the criteria.
Q3. Lastly, recommend one of the three courses of action from among your list of three courses of action that you think is the best option for the small business owner and his or her company. Justify your response, with at least two (2) different advantages and two (2) different disadvantages.
Background Information
A- The company has 19 employees, which includes two assistant managers. The owner is the only shareholder of the company. The net income for the business is the owner’s only source of income for the entire family.
B. 6 employees earn $8.00/ hour which is slightly above the current federal minimum wage, but $3/ per hour below the new federal minimum wage.
C. The other employees earn the following as of 2023:
ii. 6 earn $13/ hour
iii. 3 earn $18/ hour
iv. 2 earn $22/ hour
v. The 2 managers each earn $50,000 per year
vi. The current total cost of labor is $548,000. See Table 1 on the next page.
D. The company is organized as an LLC. It earned a profit last year of $123,000 based on sales of $1,300,000. Net income was divided up as $20,000 in
E. The owner’s spouse does not work and the family cannot justify the spouse getting a job of any kind because the wages from a new job would not cover the weekly cost of day care and after school care for the family’s three young children, ages 2, 4, and 7.
F. So, do not propose that the spouse work. Day care is incredibly expensive for a family with three children. Also, it would be nearly impossible for the owner to absorb the entire increase in labor costs due to largely fixed family expenditures (e.g, it is not possible to simply stop paying the mortgage on a house). A mortgage is a loan. It is a legal obligation.
Table 1. Summary of Current Costs of Labor
|
Job Category |
Wage/ Salary |
Number of Employees |
Hours per year |
Total |
|
I |
$8 |
6 |
2,000 |
$96,000
|
|
II |
$13 |
6 |
2,000 |
$156,000
|
|
III |
$18 |
3 |
2,000 |
$108,000
|
|
IV |
$22 |
2 |
2,000 |
$88,000
|
|
Manager |
$50,000 per year |
2 |
Salaried |
$100,000
|
|
|
Total Labor |
19 |
|
$548,000
|
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It is 2023. The US government has passed a new federal minimum wage of $11.00/ hour. It will go into effect on January 1, 2024. Please followthe instructions, given the background information in items A, B, C, and D below.
Please follow the Instructions below
Q1. Calculate the immediate annual financial impact in 2024 of the increase (change) in hourly wages. This increase will immediately affect the profitability of the company due to the impending increase in the minimum wage. Ignore tax issues such as employment tax in your calculation.
Q2. Identify at least three (3) different courses of action (options) for the owner of this company that will offset the increase in labor costs from #1 above. Explain why you think these options are viable options for the small company. Each course of action must quickly offset the effect of the increase in wages and the decrease in profitability of the company due to the minimum wage increase. If each course of action doesn’t overcome the increase in wages, then it will not meet the criteria.
Q3. Lastly, recommend one of the three courses of action from among your list of three courses of action that you think is the best option for the small business owner and his or her company. Justify your response, with at least two (2) different advantages and two (2) different disadvantages.
Background Information
A- The company has 19 employees, which includes two assistant managers. The owner is the only shareholder of the company. The net income for the business is the owner’s only source of income for the entire family.
B. 6 employees earn $8.00/ hour which is slightly above the current federal minimum wage, but $3/ per hour below the new federal minimum wage.
C. The other employees earn the following as of 2023:
ii. 6 earn $13/ hour
iii. 3 earn $18/ hour
iv. 2 earn $22/ hour
v. The 2 managers each earn $50,000 per year
vi. The current total cost of labor is $548,000. See Table 1 on the next page.
D. The company is organized as an LLC. It earned a profit last year of $123,000 based on sales of $1,300,000. Net income was divided up as $20,000 in
E. The owner’s spouse does not work and the family cannot justify the spouse getting a job of any kind because the wages from a new job would not cover the weekly cost of day care and after school care for the family’s three young children, ages 2, 4, and 7.
F. So, do not propose that the spouse work. Day care is incredibly expensive for a family with three children. Also, it would be nearly impossible for the owner to absorb the entire increase in labor costs due to largely fixed family expenditures (e.g, it is not possible to simply stop paying the mortgage on a house). A mortgage is a loan. It is a legal obligation.
Table 1. Summary of Current Costs of Labor
|
Job Category |
Wage/ Salary |
Number of Employees |
Hours per year |
Total |
|
I |
$8 |
6 |
2,000 |
$96,000
|
|
II |
$13 |
6 |
2,000 |
$156,000
|
|
III |
$18 |
3 |
2,000 |
$108,000
|
|
IV |
$22 |
2 |
2,000 |
$88,000
|
|
Manager |
$50,000 per year |
2 |
Salaried |
$100,000
|
|
|
Total Labor |
19 |
|
$548,000
|
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