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Indifference Curve

A web-based company stocks and ships after-market auto parts. The company employs several workers to put together packages for shipment based on customers' online orders, and each worker assembles on average 4 packages per hour. Workers are unsupervised and earn $4.00 for each order they assemble. An inspector checks each order, and workers are only paid for orders that are assembled correctly the first time. Vice President of Operations has suggested that the per unit pay scheme be dropped in favor of a flat $14/hour wage rate. Should they adopt the suggestion and why?

Solution Preview

Here we should check the cost savings of the new suggestion (if any). Assunimg that the worker assembles the 4 orders correctly the first time, then he would be paid $16 per ...

Solution Summary

Assess cost savings of the new suggestion.