Lander Metals Inc A) Do Not Change the Production Floor

question 145

Multiple Choice

Lander Metals Inc.manufactures automobile spare parts for car manufacturers.Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year.Using the information below regarding current operations and the new proposal,which of the following decisions should management accept? $\begin{array}{lrr}&\text { Current }&\text { Proposed }\\\text { Required machine operators } & 16 & 12 \\\text { Materials-handling workers } & 3.00 & 3.00 \\\text { Employee average pay } & \$ 15 \text { per hour } & \$ 18 \text { per hour } \\\text { Hours Worked per employee } & 3,400 & 3,150\end{array}$

• A) Do not change the production floor.
• B) Rearrange the production floor.
• C) Either, because it makes no difference to the employees.
• D) It doesn't matter because the costs incurred will remain the same.

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Definitions:

Demand

The consumer's desire and willingness to pay a price for a specific good or service.

Elastic Demand

A market condition where the quantity demanded of a product changes significantly in response to price changes.

Inelastic Demand

A market situation where the quantity demanded of a product does not change significantly when its price varies.

Price Elasticity

A measure of how much the demand for a product changes in response to a change in its price.