Recommendations for the Rising Cost of Labor

In: Business and Management

Submitted By dkendall1678
Words 653
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Recommendations for the Rising Cost of Labor
An increase in a small business’ labor cost can mean a decrease in the efficiency with which the business generates output using certain inputs. The increase in unit labor cost may result in higher expenses compared to revenue. Unless Guillermo decreases other expenses or increases his selling prices to increase his revenue his profit will decrease. Guillermo will need to investigate the cause to determine how he can decrease his unit labor cost and regain his previous level of productivity. With the development of the fire retardant and stain resistant coating adding value to Guillermo’s furniture pieces, he may be able to increase his selling price for his pieces of furniture; however he will need to ensure his pricing it not out of the realm of market value for his pieces to prevent sales from declining as well. To reduce costs, Guillermo may want to take a look at restructuring the work and workload for his furniture manufacturing. Becoming more efficient may impact manufacturing costs, which could help to offset labor costs.
Assumptions about real world loan costs
Guillermo’s building was financed 12 years ago at 7.5% and 80% LTV. According to TradingEconomics.com Mexico’s current interest rates are around 4.5%. This is 3% lower than what Guillermo mortgaged his building at 12 years ago. It may be in Guillermo’s best interest to research the possibility of refinancing his mortgage for a lower interest rate to save on his overall costs. http://www.tradingeconomics.com/interest-rates-list-by-country?c=latin+america Value of Guillermo's patent
According to King (2003), Intellectual capital is recognized as the most important asset of many of the world’s largest and most powerful companies; it is the foundation for the market dominance and continuing profitability of leading corporations. Calculating the value…...

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