Why Unionization Is The Minimum Profit Gained

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Assumptions: For all 3 options we listed, we are assuming that unionization will happen to calculate the minimum profit gained, renovations will occur, everything produced are sold, and the income tax is at 34%. For the first two options, we are assuming the factory has a max capacity of 7500 cwt. For the third option, we are not outsourcing as our max capacity was increased by 40%. Introduction: Hamilton Flour is a flour production facility that focuses on the purchasing and processing of wheat into flour which is then sold to distribution companies. Currently Hamilton Flour purchases wheat at $5.15 per bushel. The board of directors of Hamilton came to the decision to renovate the facility at $1,500,000 while keeping the…show more content…
The second option is to decrease the weekly produce down to 5 days a week, weekdays only, but the 15,000 cwt of flour would have to be outsourced to another company at a price. The third option available for consideration is to reduce the weekly production to weekdays only (5 days a week) but rather than outsourcing the production to a third party company, the mill would install a significantly faster grinder in order to increase the mill’s capacity. Note: We are assuming that we are selling everything we make Options: Due to the operational life of the new grinder and the contract’s length is 10 years, we will consider the three cases over the span of 10 years: 1) Operation is at 7 days a week, with 10 workers all working 10 hours per day for 52 weeks. 2) Operation is on weekdays only (5 days a week), with 10 workers all working 10 hours per day for 52 weeks. However 15,000 cwt of the flour production will be outsourced to Fred’s Blue Mill weekly, costing $13.00/cwt. 3) Operation is on the weekdays only (5 days a week), with 10 workers all working 10 hours per day for 52 weeks. The installation of a faster grinder increases the capacity by 40% and the installation costs are $3,500,000. An important note to take into consideration is that we have the sufficient number of employees; however at any given time that is being considered in our
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