Final answer:
The calculation named cost per hour consists of dividing the annual total cost of an item by the number of hours worked, which is essential for understanding labor costs in business and economics.
Step-by-step explanation:
The result of the calculation of any contract item by dividing the annual total cost of the item by the number of bargaining unit hours worked during the year is called the cost per hour. This concept is central in business and economics, particularly in labor economics and the analysis of labor costs.
For instance, if an employee is paid a wage of $1 per hour and works one hour, the total and also the marginal cost of labor would be $1. When negotiating contracts, especially in unionized settings, understanding the cost per hour is crucial since it affects the budgeting and financial planning of the firm as well as the negotiation strategy of the union.
If wages increase due to union demands, the firm might invest more in capital to maintain productivity, potentially hiring fewer workers but at higher productivity rates.