Single: Three Shifts

Suppose you have the following information about the costs of running three shifts in a day:

Day Shift has average cost per shift of $20,000.
Swing Shift has average cost per shift of $40,000.
Night Shift has average cost per shift of $30,000.
If each shift generates $35,000 in revenue, which shifts do you run?
Question options:

  • Swing
  • Night
  • Day
  • None

Solution:
You need to check if the incremental benefits are greater than the incremental costs. If they are, it is a good idea. Note that, except for the Swing shift, the incremental benefits, $35,000 in revenue, is greater than the cost per shift.

Day Shift has average cost per shift of $20,000. = $35000-20000=$15,000
There will be a profit of $15,000
Night Shift has average cost per shift of $30,000 = 35,000-30,000=$5000
Night shift there will be profit of $5000
Therefore, I will choose day shift and night shift.

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