This Instructor's Manual, to accompany



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Dependent Coverage 0.0% paid by company


Pension Plan 50.0% paid by company

Monthly Benefit 2.0% of base/yr of ser.

Life Insurance 2.0 x annual salary
Normal Severance Pay 0.0 weeks pay/yr of ser.

If due to automation 0.0 weeks pay / yr of ser.
Company SUB Funding 0.00 cents / hr worked

* Assumes no mkt growth, Prof 0%, CPI up 5%, PPI 3%, Health 13%

Income Statement* Yr 0 Yr 1

Net Sales ($Mil) $45.9 $47.2 3%

Grandville Labor 17.7 18.3 3%

Newton Labor 2.7 2.8 2%

Materials & Other 11.0 11.3

New Contract Items -- --

Inventory Change -- --

Depreciation 0.3 0.3

Total COGS $31.7 $32.7 3%

Gross Profit $14.1 $14.5 3%
Gross Margin 31% 31%
S&A Expense 7.1 7.5

Non‑Recurring Exp. 0.2 0.2
Pretax Net I $6.8 $6.9 --

15% 15%

Shared Profits -- --

Pretax Net II $6.8 $6.9 --

15% 15%

Income Taxes 2.3 2.3

Profit After Tax $4.5 $4.5 --

10% 10%
*Assumes no mkt growth, * Prod 0%, CPI up 5%, PPI 3%, Health 13%
Instructions to Instructors Concerning D.G. Barnhouse Mock Bargaining When Students Manually Perform Contract Costing

1. I hand out the Memorandum to Mock Bargaining Students --D.G. Barnhouse, Manual Contract Costing and discuss it with students two weeks before the start of face-to-face mock bargaining. Students at this time should receive the respective union and management supplementary memos. Students also should receive the document, "Contract Costing Information -- D.G. Barnhouse." Students should be reminded that the basic D.G. Barnhouse mock bargaining material is provided in Appendix A of the text.


2. I put three students on each bargaining team (i.e., three union and three management team members). I give the students the opportunity to submit to me their preferred bargaining team members and their opposition team, if the other side agrees, in advance of when I hand out the materials described above. I have in the past occasionally assigned all teams on a random basis. But, I have found that students enjoy and tend to get more out of the exercise if they can bargain with or against students they know. By knowing other team members this makes it easier for the students to meet before class and prepare for the mock bargaining exercise (see below). I do assign students who do not have a strong preference to a bargaining team and try to avoid the impression that students are expected to know people in the class and have a bargaining team preference.
3. Attached is the form "Summary of Contract Proposals and Estimated Costs," which should be handed out to assist students in reporting their proposals and the costs of these proposals as required in the Memorandum. Also attached is the form "Summary of Contract Settlement and Estimated Costs," which students can use to summarize their contract settlement and estimated costs once they have reached agreement.
4. I (or my teaching assistant) provide some tips and techniques concerning contract costing in a supplementary 30-minute lecture. I also find it useful to have someone available to provide consultation assistance to respond to student questions that arise concerning contract costing.
5. When and for how long should the union and management teams bargain face-to-face? I have used two different schedules. In some classes face-to-face mock bargaining occurs on one day (usually a Saturday). In this case, students are told to show up to previously assigned bargaining rooms at 10:00 a.m. and are told that they must reach a settlement or announce impasse by 2:00 p.m. that day. I also have had classes that meet and bargain during two successive normally scheduled class sessions (when these class sessions each are at least 1 hour and 15 minutes long).
In the latter case, students must reach settlement or announce impasse by the end of the second class session.
6. While students are engaged in face-to-face bargaining I (and my teaching assistant) observe them and move across the various bargaining groups. I use these observations and the requirements described in the Memorandum to Mock Bargaining Students as the basis for student grades.

Contract Costing Information - D.G. Barnhouse

WAGES: An increase of $1.00 per hour in the wage rate will add at least $1.15 to labor costs, since social security, state unemployment insurance, overtime and shift premiums, and other labor costs all vary with payroll. Thus, every one-cent increase per hour will increase payroll by $230.00 per week, or $11,960.00 per year. Also, every additional one cent per hour for the skilled employees (of which there are 91 at present) will add $36.40 per week, or $1,892.80 per year.


PENSION AND INSURANCE: The cost to the company of picking up the employees' contributions to the pension and life insurance plans will be $25,000.00 per week (i.e., 500 times $50.00); the total will be $1,300,000.00 per year. A new, more liberal plan might cost the company about 25% to 50% more than the current one.
The cost to the company of picking up employee payments for Blue Cross-Blue Shield is $180,000.00 per year ($30.00 per month per employee). If the company also picks up dependent coverage, that will mean at least an additional $180,000.00 per year, depending on how many employees who don't have it currently will want dependent coverage if it is available free to them. Blue Cross-Blue Shield rates should rise soon anyhow.
SUB: The costs of Supplemental Unemployment Benefits depend on the program. Many new SUB programs started with company contributions of 5 cents per worked hour, which amounts to about $50,000 per year for Barnhouse -- more if the company uses a lot of overtime. The following contributions to the SUB fund in auto have increased more than 6-fold in the auto industry over time, so 5 cents is a low guess in the long run. Company contributions to SUB funds stop at a certain ceiling level, but that level is so high that the company might increase the contribution for decades before that happens.
PAID VACATIONS AND HOLIDAYS: Given current wages, one week of vacation costs the company on average (per employee) $428.48. If vacation weeks increase, and if wages increase, this cost will rise accordingly. For holidays the cost to the company per employee is $85.49 per day. So, the cost for each added paid holiday will be $42,745.00 a year, including the loss of business/revenues, and the possible overtime expenditures to get orders out, making up for the lost day.
REST PERIOD/WASH-UP TIME: Given the average wage of $13.39 per hour, every minute of time off per day (for all employees) costs the company 111.58. Therefore, a 15-minute additional break costs the company $585.795 per year.

SUMMARY OF CONTRACT SETTLEMENT AND ESTIMATED COSTS

Language Incremental Costs

Union Security
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