Assume you work for a company that produces golf carts sold throughout the world

Question

Assume you work for a company that produces golf carts sold throughout the world. The company’s management is in the process of establishing the standard hours of direct labor required to complete one golf cart. Assume you are the production supervisor and you receive a bonus for each quarter that shows a favorable labor efficiency variance. That is, you receive a bonus for each quarter showing actual direct labor hours that are fewer than budgeted direct labor hours. Management has asked for your input in establishing the standard number of direct labor hours required to complete one golf cart.

1. As the production supervisor, describe the ethical conflict you face when asked to help with establishing direct labor hour standards.

2. How might the company avoid this conflict and still achieve the goal of obtaining reliable direct labor hour information? That is, what type of incentives might be offered to ensure the production supervisor provides accurate information?

Explanation / Answer

Suggested answer for this is as below-

1. As a production supervisor the ethical conflic that I could face is "the Incentive" that i used to get based on labor efficiency.

It would be my focus to establish such direct labor hour standard which would help me increase my bonus towards labor efficiency to ear more and more money.

Another reason can be on the "Quality" aspect, I will try to complete work in less hours which will drive in reducing the quality of product prepared by workers.

2. Company can achieve this goal by linking the Bonus on labor hour efficiency with quality of product delivered.

So that the incentive calcluation is not only based on completing the work in lesser time but also have the product delivered bug-free.

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