Question

You are a manager of a division of a company that is responsible for the final assembly of two computer products, modems and keyboards. You manage two employees, Julio and Chenyu, who each work 8 hours per day. Currently you have assigned both Julio and Chenyu to spend the first 7 hours of the day assembling keyboards and the last hour assembling modems. Julio can assemble 2 modems per hour and 14 keyboards per hour. Chenyu is more highly skilled in both activities. She averages 3 modems per hour and 15 keyboards per hour.

1.What are potential reasons why you might not want to change the work assignments (assume that more assembly of either or both products is desirable)?

Answer 1

Potential reasons for not changing the work assignments are as follows -

• The total opportunity cost of producing keyboards is 5/29 . Whereas the total opportunityopportunity cost of producing modems is 29/5. Assuming that more assembly of either or both products is desirable, the work assignments are efficient. According to the data, first seven hours is used for assembling keyboards and the next hour assembling modems. Now, since the opportunity cost of producing keyboards is less than that of modems, therefore, maximum hours are allocated in the assembly of keyboards.
• Since, Chenyu has a very small margin of absolute advantage in assembling both items, this allocation provides the best results. If both Julio and Chenyu had comparative advantages in assembling both goods, the scenario would have been different.