Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is

Question

Quizplus · Accepted Answer

To determine if it is profitable for Tucker to hire an additional worker, we need to compare the cost of hiring the worker to the additional revenue generated from the increased output.

Assuming the cost of materials and overhead remains constant, the additional revenue generated from the increased output is 5 units per hour x $5.00 per unit = $25.00 per hour.

Therefore, Tucker should hire the additional worker only if the wage rate is less than or equal to $25.00 per hour.

Option A is incorrect because a wage rate of $5.00 or less would not provide any additional revenue to cover the cost of hiring the worker.

Option B is incorrect because a wage rate of $1.00 would not generate enough revenue to cover the cost of hiring the worker.

Option D is incorrect because there is a specific wage rate at which it becomes profitable to hire the additional worker, and we have calculated that to be $25.00 per hour or less.

Tucker Corporation Sells Its Product for $5