Final answer:
To calculate direct labor cost, Georgina needs to include wages, overtime, benefits, and any associated taxes for her employees. Changes in wages due to union negotiations may prompt cost reassessment and potential changes in labor and equipment use.
Step-by-step explanation:
When Georgina wishes to calculate the direct labor cost for her bow making business, she needs to consider all costs that are directly attributable to the production of the bows.
This typically includes the wages paid to employees, including any overtime and bonuses, as well as payroll taxes, worker's compensation insurance, and any benefits like health insurance or retirement contributions that are tied directly to those employees.
For example, if she pays her two employees $16 an hour and they each work 40 hours a week, the direct labor cost for that week would be the hours worked multiplied by their hourly wage. If there are benefits at a certain rate, she would further add these to the hourly cost.
In the context of changing labor costs due to union negotiations, like in the provided scenario where a union negotiates a wage increase from $16 to $20 an hour, Georgina would need to reassess her production methods. An increase in the direct labor cost might influence her to adjust the labor and equipment balance.
Increased wages might lead to considering whether investing in more equipment and using less labor could reduce costs or improve labor productivity.