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Minimization of the cost is the basic rule which I used by the producers for determining what mix of capital and labor produces output at a low cost. This would include how to deliver goods and services at the lowest possible cost while maintaining high levels of quality. The approach of cost minimization reduces the expenses without affecting the quality of service and product.
When setting the minimum wage level, economic factors are taken into account by the policymakers of the XYZ Company. If the minimum wage is increased too much or set too high, then it can affect the labor cost which must be paid by an employer. This would have the effect of increasing prices, hurting exports, & reducing employment. Low wages, on the other hand, will hamper domestic consumption (Benmelech, et al., 2022).
Some of the steps can be taken by the XYZ Company to minimize the cost of production-
1) The facility can be audited- when reducing the production cost first thing is to understand what the manufacturing cost is. An audit can be carried out of all the key operating costs and for a fixed time it must be tracked. Limit administrative costs and manage debt to see if they can be reduced. Also consider what you’re spending on overhead expenses, such as maintenance of the building, rent, insurance coverage, utilities & other incidentals.
2) The direct cost of material must be reduced- cost can be minimized by finding more competitive supplies for the materials required. If cheaper supplies are difficult to find, then to get the lower price unit, negotiation can be done for the longer-term contract. There are times when suppliers offer bulk discounts to businesses whose annual sales or turnover increase substantially, and they may also offer discounts if you pay promptly or in cash (Garin, & Silvério, 2019).
3) The production process can be evaluated- pay attention to the process of production and if any process is identified which is time-consuming or redundant then it can be removed. Make sure all the machines are up to date so that downtime can be reduced. During the slack period, routine maintenance can also be done to increase time efficiency.
4) The product can be restructured-It could also be worth considering using fewer or cheaper base materials, if possible, without negatively impacting the quality. Reduce product complexity by removing features that aren’t directly related to the product’s market appeal (Garin, & Silvério, 2019).
Theory- industry wage levels
The person who believes that there is a connection between the productivity of labor and wages within the occupation simplicity assumes the following- Workers’ contributions to the firm’s revenue grow when per worker output increases, increasing in demand for workers. As employees’ wages are determined by the demand and supply, an increase in demand for the product and services will also affect the wages. An increase in demand will increase wages. For the production of, the organization, in the long run, work and capital are the two important inputs that must be determined. In a different session, the various approaches can be considered for generating a similar output (Widhiarso, & Rosyidi, 2018).
Some of the factors which influence the wages rate determination-
Ability to pay- paid rate will influence by the ability of the industry to pay, if the organization is facing losses then they might not pay enough wage rates. On the other side organization which is profitable can pay higher wages to the employees.
Demand and supply- the demand for labor market condition can affect the wages rates. When the particular type of labor demand is more and supply is less in such a situation wages will be high.
Prevailing market results- prevailing wage rates can’t be ignored by any organization. The wage rate by the organization will form the base for decisions on the wage rates (Widhiarso, & Rosyidi, 2018).
It has been concluded that the demand curve is the graphical reforestation of the relationship between the price of the services or goods and for the given period of quality demanded. Depending on income or the rate the work amount can increase or decrease as well. To increase the employee wage rate organization needs to pay attention to productivity. Age employee wage rate is related to the increase in productivity.
Benmelech, E., Bergman, N. K., & Kim, H. (2022). Strong Employers and Weak Employees How Does Employer Concentration Affect Wages?. Journal of Human Resources, 57(S), S200-S250.http://jhr.uwpress.org/content/57/S/S200.full.pdf
Garin, A., & Silvério, F. (2019). How responsive are wages to demand within the firm? evidence from idiosyncratic export demand shocks (No. w201902).https://oconnell.fas.harvard.edu/files/garin_silverio_november_18.pdf
Widhiarso, W., & Rosyidi, C. N. (2018, February). Multi objective optimization model for minimizing production cost and environmental impact in CNC turning process. In AIP Conference Proceedings (Vol. 1931, No. 1, p. 030024). AIP Publishing LLC.https://aip.scitation.org/doi/pdf/10.1063/1.5024083