If workers are paid $10, what is the labor cost per unit of output in Table 21.1 when output is increased from 15 to 35 units of output?
A) $0.28 per unit.
B) $0.50 per unit.
C) $10 per unit.
D) $20 per unit.

Question

If workers are paid $10, what is the labor cost per unit of output in Table 21.1 when output is increased from 15 to 35 units of output?
A) $0.28 per unit. 
B) $0.50 per unit. 
C) $10 per unit. 
D) $20 per unit.

Quizplus · Accepted Answer

To calculate the labor cost per unit of output, we need to divide the total labor cost by the total output.

When output is 15 units, the total labor cost is 4 workers x 8 hours x $10/hour = $320. So, the labor cost per unit is $320/15 = $21.33.

When output is 35 units, the total labor cost is still 4 workers x 8 hours x $10/hour = $320. So, the labor cost per unit is $320/35 = $9.14.

The change in labor cost per unit is ($9.14 - $21.33)/20 = -$0.56.

Therefore, the labor cost per unit of output decreases by $0.56 when output is increased from 15 to 35 units.

The best choice is B, $0.50 per unit, as it is the closest option to the actual decrease in labor cost per unit.

If Workers Are Paid $10, What Is the Labor Cost