Why Might Labor Costs Be Reduced in a Value Stream

question 28

Multiple Choice

Why might labor costs be reduced in a value stream system?

• A) The elimination of the need for any specialized skilled employees such as industrial engineers or production schedulers.
• B) The labor costs of industrial engineers and production schedulers can be pooled and allocated to the value streams.
• C) Some of the workers can be cross-trained to perform value-added activities within the value stream.
• D) None of these.

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Definitions:

Consumer Surplus

The contrast between the aggregate amount buyers are willing to shell out for a good or service and the total they actually do.

Total Surplus

The combined benefit that both consumers and producers receive from a transaction, comprising consumer and producer surplus.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e., the market price).

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often reflecting gains from trade.