Xanadu Industries Manufactures and Sells the Same Calipers as Utopia

question 39

Multiple Choice

Xanadu Industries manufactures and sells the same calipers as Utopia Industries. Employee wages account for thirty-five percent of the cost of manufacturing calipers at both Xanadu Industries and Utopia Industries. Xanadu Industries is seeking a competitive advantage over Utopia Industries. Richard, the manager put in charge of devising a strategy to meet this end, suggests lowering employee wages. This leads to a grave conflict between Richard and the labor union. Which of the following, if true, would suggest that the labor union will accept Richard's suggestion to lower the wages?

• A) As they make a large number of precision instruments, caliper manufacturers receive huge volume discounts on raw materials.
• B) Xanadu Industries has taken away twenty percent of Utopia Industries' business over the last year.
• C) Utopia Industries recently set up a new manufacturing facility in the vicinity.
• D) Many people who work for manufacturing plants live in areas in which the manufacturing plant is the only source of employment.
• E) Utopia Industries pays its employees, on average, ten percent more than does Xanadu Industries.

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