Question

Which one of the following actions is MOST LIKELY to result in HIGHER production costs per branded pair at one of your company's production facilities?

A) Increasing total employee compensation by 3% at a production facility and, in turn, realizing a 5% increase in production facility and, in turn, realizing a 5% increase in production worker productivity
B) Increasing spending for best practice training from $2,000 per worker to $2,500 per worker.
C) Increasing expenditures for TQM/Six Sigma quality control from $1.50 to $2.00 per pair in Year 12.
D) Increasing the S/Q rating of brand pairs produced from 4.5 stars to 5.5 stars.
E) The installation of production improvement option B

Answer 1

Increasing expenditures for TQM/Six Sigma quality control from $1.50 to $2.00 per pair in Year 12 is most likely to result in higher production costs per branded pair at one of your company's production facilities. The answer is C.

Step-by-step explanation:

The action that is most likely to result in higher production costs per branded pair at one of your company's production facilities is increasing expenditures for TQM/Six Sigma quality control from $1.50 to $2.00 per pair in Year 12 (option C).

By increasing the expenditures for quality control, the company will incur additional costs for implementing and maintaining a higher level of quality control measures. This can lead to higher production costs per unit.

Increasing the S/Q rating of brand pairs produced from 4.5 stars to 5.5 stars is most likely to result in higher production costs per item due to the need for better materials and processes. Employee compensation and spending on training or quality control might not necessarily increase overall costs if productivity gains offset the initial expenses.

The action most likely to result in higher production costs per branded pair at a company's production facility is increasing the S/Q rating of brand pairs produced from 4.5 stars to 5.5 stars. While all options could potentially increase costs, improving the quality rating often involves significant investment in materials, processes, and possibly technology, which would increase costs more substantially than the other listed actions. For example, higher quality materials typically cost more, and additional processes or quality checks can increase labor and operational expenses.

It's important to consider how each action impacts productivity as well. While an increase in employee compensation might initially seem to raise costs, the resulting increase in productivity could offset the higher wages, resulting in a net decrease or neutral impact on production costs per item. Similarly, if spending on best practice training or TQM/Six Sigma quality control leads to more efficient production or fewer defects, the initial investment could be recovered through lower operating costs over time.

In relating this scenario to the provided examples regarding labor and capital costs, it's clear that a firm's production method decisions are significantly influenced by labor costs and the cost-effectiveness of machine use. If labor becomes more expensive due to wage increases, firms may opt for more capital-intensive production methods. However, this does not directly influence the quality rating of products, which is typically a separate consideration that leads to higher production costs when enhanced.