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Sir, I’m quite confuse with this question from Kaplan Exam Kit.
Which one of the following would serve to increase the TPAR?
A) An increase in the speed of the fastest machine in the production process
B) An unexpected increase in the factory rent
c) A 5% wage increase linked to an 8% improvement in productivity
D) A 10% sales discount to stimulate demand by 20%The answer is C which it states that overall the cost per unit should reduce, and so the measure for throughput should improve.
I’m quite confuse why the increase of wages will reduce cost per unit?
Can you explain this to me?
An increase in wages on its own would not reduce the cost per unit, but there is an improvement in productivity. That means that the workers are working faster and so the time per unit will be less.
Given that the time per unit is reducing by more than the cost per hour is increasing, then the labour cost per unit will reduce.
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