What is the net effect of moving the employee from mixing/heating to cutting/assembly? What is the net effect if a new employee is hired for cutting/assembly?
Question 3.2
Fit-For-A-King Inc. manufactures foam products for several upholstery companies. This company has two workstations, mixing/heating and cutting/assembly. The mixing/heating station is limited by the capacity of the equipment. Cutting/assembly is limited by the speed of the cutting machine workers. Cutting/assembly normally lags behind mixing/heating. Because the demand has increased in recent months, management is considering adding another person to cutting/assembly. This would increase the department's costs by $4,000 a month. If the person is moved from mixing/heating, that department's cost would decline by $3,000. By keeping mixing/heating laborer’s the same, the department can increase production on-call by 10 percent. Current idle time in mixing/heating averages one-half person a day for a net cost of $1,400 a month.
Required
- What is the net effect of moving the employee from mixing/heating to cutting/assembly?
- What is the net effect if a new employee is hired for cutting/assembly?
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