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Comment on the arguments presented by Freddie Jones in support of a $10 piece rate a. Currently a labour can achieve maximum wage of $4.25/hour after completing four months. This is 40*4.25= $170 per week. After 4 months labour can achieve efficiency of 25 units per week. With $10/unit his wage would be $250 per week. This is a significant improvement and will motivate experienced labour to stay longer and lead to increased productivity. b. Saving from outfitting due to lower turnover estimated to be 150000.

Comment on the arguments presented by Freddies Father in support of current pay system a. Estimation of wage per units is incorrect as it is based on standard hours per unit (2.1) while current efficiency is 2.3 hours/unit. b. Focus is not on improving productivity but cost cutting which can lead to even higher turnover. c. Company is not able to fulfil the demand due to low productivity. Current productivity is 220000 units/year wile demand is 250000 t0 300000 units. If sales are increased then higher wages can be paid from increased profits.

Recommendations a. Implement the proposed system. b. Proposed system of wages will motivate labour to increase productivity. c. Production will increase by 28% while wages will increase by 36%. Contribution margin will increase from 52 to 65 due to increased sales which will better cover the fixed expenses and lead to higher net profit.