The case study involves the labors cost management on the basis of forecasted demands. The demand for the entire period has been grouped into six bimonthly (2-month) periods. Moreover, the for better future budgetary and strategic controls, Kangaroo P/L has also clearly identified specific criterions like working hours, labor cost per hours for normal and overtimes hours, inventory holding cost etc. Currently, Kangaroo P/L has 22 employees and as per the forecasted demand, the company will recruit and make their labors to work for overtime. The prime aim of this paper is to offer the best strategy where per unit labor cost will be the lowest.
Direct labor cost is variable costs which fluctuate with the production. Unlike fixed overheads, controlling the variable costs is more challenging and it requires more financial strategic depth. For developing strategies the direct labors cost, the primary aim will be to minimize the number of the labors. In the process, the manufacturing companies can either install the machineries that will reduce the necessity of labors or can offer attractive overtime compensation. Installing a new machinery will required one time capital expenditure that might not be possible for the organizations with weak financial positions. ...Show more