What is the source of conflict between Local 635 and the Riverside Hotel?
The main source of conflict between the management and the kitchen workers arises out of the difference is costs estimated by the two. The management has provided a agreement with workers stating that workers shall receive one free meal per shift up to a cost of $8, with any cost over $8 being deducted from wages paid to said employee. While calculating the cost of their meals the employees prefer to consider only the cost of material used in making the meal. For example when calculating the cost of a prima rib, Josh the line cook takes into account only the direct material cost of meat and salad which is only the incremental cost i.e. change in variable cost in producing an extra unit of the dish. The management on the other hand takes a different way of calculating the cost of meals consumed by employees. Instead of just considering the incremental costs they also include various other costs like fixed cost allocated to each dish. Such costs include the fixed overhead costs like cost of over used, cost of permanent cook and other kitchen staff etc. Then there are also costs like depreciation of oven, heat, electricity etc. Due to such difference in the definition of cost understood by the two the employees are dissatisfied with management and feel cheated.
What are some examples of variable, fixed, sunk, and opportunity costs in the Local 635 case?
Variable cost is the cost that is directly proportionate to the number of units being produced. It increases proportionately if the numbers of units that are being produced are increased. In this case the cost of meat and salad etc i.e. direct ingredients in the dish are variable costs.
Fixed costs include all costs that do not vary with activity for an accounting period. Fixed costs are at any time the inevitable costs that must be paid regardless of the level of output...