# An economics question, which job would you take?



## binki (Jul 16, 2006)

Would you take any of these jobs?

a) The first job is a 300 unit order that yields a profit of $1250. The time to complete is 90 hours. This yields a $13.88/hr profit.


b) The second job is a 600 unit order that yields a profit of $1000. 
The time to complete is 50 hours. This yields a profit of $20/hr. 

c) The final job is a 100 unit job that takes 250 hours to complete and yields a profit of $4000. This yields a $16/hr profit. 

If you could only take a/b combined or c alone or any of the 3 alone what would you do?

Assume all hours are person or machine hours. So multiple people or machines will reduce the elapsed time. 

Assume the profit is your real profit. I know everyone has costs per hour but figure those are taken care of here. 

*sorry, on the poll C is not combined*


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## mystysue (Aug 27, 2006)

that is way to many hours for that pay.. 
I would send all of them down the road..

Of course I have overhead.. etc.. which i figure into my cost.. so my hourly rate is about 85 an hour.


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## binki (Jul 16, 2006)

if it is not enough for you then add one 0 to the profit and double your min/hr rate. So you would be looking at 170/hr min and you would be looking at 139/hr, 160/hr and 200/hr.


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## treadhead (Jul 26, 2006)

There are many considerations that would have to be taken into account at the time of the decision such as resource availability, when is payment received, shop load, etc. But, just based on what you present and assuming full capability to take on any of these jobs I would be inclined to take the one that will pay the most. Job C which will put the most $$ in my pocket.


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## taprackbang-luke (Nov 25, 2007)

binki said:


> Would you take any of these jobs?
> 
> a) The first job is a 300 unit order that yields a profit of $1250. The time to complete is 90 hours. This yields a $13.88/hr profit.
> 
> ...


With the dollars and margins varying with the unit order so much, it says that the business doesn't have its core product line down and the labor has to use one set of machines or techniques versus another. The business is too small. 

If I had to take one, it would be option B. If given a fourth option, I would chose to NO BID to those jobs.


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## jberte (Mar 25, 2007)

i'd take all of them - sub out a & b and do c myself - taking less for both a & b but no time or equipment tied up in production. because of the hours cited in c it would appear to be both more complicated and more challenging - and i'd likely want more personal quality control on it's outcome.


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## Solmu (Aug 15, 2005)

binki said:


> Assume the profit is your real profit. I know everyone has costs per hour but figure those are taken care of here.


My costs per hour already cover labour, which means the figures above would be money in the bank, which means if I had the time and the capability it's a no-brainer (do them all).

Failing time or capability... well, there's always outsourcing. Why say no to money?

I can't help but feel this is a trick question


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## mystysue (Aug 27, 2006)

lol.. solmu.. yeah.. that part about the real profit.. i dont remember being there when i answered.. 
If that being so.. and the hourly rate is taken care off.. I would then take any of them.. if that amout is pure profit.. and i would prolly have one of our guys that we use when we are busy come in and knock the job out..rof.. I would get very bored spending that amout of hours on a job.. ..


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## knifemaker3 (Sep 8, 2006)

I too would take any of the three but voted a/b combined if I had to make the choice.

My reasoning:

Based on a 10 hour day:
a/b combined =14 days
c alone= 25 days

That gives me 11 days to make other orders, work on the books, work on more advertising, etc. even take a day and go fishing!!!!

However, if I could, I'd take all 3 jobs.

Don't knock $13 for an hourly wage. In the part of southern Missouri where I live you are lucky to get that much for doing carpentry work. Most people around here live faily well on $8.50 an hour. In fact you are considered to have a good job if you make that much.

I'd freak out if someone told me they charged $85 an hour to work  . But I also realize that is probably what it takes to make it in other parts of the world.

Glad I still live in a part of the US where I can live and work below poverty level and still live well  

Craig


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## billm75 (Feb 15, 2007)

I would have to factor in the possibility of future work from any of the choices mentioned. If A were going to give me that work on a somewhat regular basis, then yes, I would take A. I might also throw in B or C at that point just to keep profits up.

There are too many variables not being considered, but if it's simply black and white as presented: One time jobs, one time profits, I would take C above the other 2.


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## Girlzndollz (Oct 3, 2007)

I'd take B. assuming 10 hour work days - mon - fri:

c- gives 4000 profit over 25 day period. 
b- gives 1000 profit over 5 day period. 

c-amount earned each 5 day period = $800
b-amount earned each 5 day period = $1000 (better job)

Your per hour profit makes that point stand out already, but if you can only choose one, I'd choose b based on the above comparison of job revenue in the same 5 day period. The $4000 may look more lucrative at first, but yields 20% less revenue in the same period. So many other factors but disregarding them and keeping it simple, B. MHO.


a- takes almost two weeks for barely any extra money over working one week.



and this question does leave me wondering about what times trains arrive if they left the station at.... 


ADDED:
I forgot about the A/B choice.

a/b- $2250 over 140 hours (2.8 5 day periods)

$2250 / 2.8 = $803.57 per same 5 day pay period, so adding a to the b job also reduces the profit by about 20% in the same 5 day period.

I thought we had to chose only one ?

When do we find out the answer to the test?


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## treadhead (Jul 26, 2006)

Hey....no cheating... 

Taking all three wasn't one of the options.... 

But, for the record, if it was I would have voted for all three myself.

Like Solmu said...why turn your back on money if you have the capability to do the job?


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## binki (Jul 16, 2006)

My point was to pretty much show that some of us will take the highest dollar volume while others have a min. that they would work for per hour. If your equipment is idle it is making $0/hr. If you are fully booked then you can be picky about the jobs that you take. If you have fixed costs per hour then you may not want to do an unprofitable job. It all depends on your situation. 

I know we all talk about having minimums per hour or job but when presented with a wad of cash that sometimes can change our minds. After all, a dollar is a dollar on the bottom line.


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## jberte (Mar 25, 2007)

good thread fred! when it comes right down to it tho - didn't we ALL go into business for ourselves precisely because we looked at the world and our place in it just a little differently than most? personally i craved the 'sink or swim' mentality that i just never got with a 'day job', and the knowledge that my success or failure was MY call and that the only hard & fast rule was that there IS no hard and fast rule - i have the freedom to look at each situation that comes my way and decide for myself how i'm going to handle - or if i'm going to pass it by. 

however, that said, if i had several employees and a lot of fixed overhead my answer would have looked a bit different


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## Gunslinger (Aug 3, 2007)

I can't answer the question ...

As John said, I would take all three ... I don't like to turn down a job. If I couldn't handle the load, I would either buy more equipment, or farm out any work needed to complete the job.

My wife handles the numbers, so all these calculations y'all are coming up with for the most profitable and effecient answer is making me crosseyed!


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## binki (Jul 16, 2006)

I understand wanting to take all three but the exercise was to force a choice of dollars per hour or total dollars. 

The answer should be dollars per hour if you are fully booked up and have lower paying per hour jobs and to take the total dollars if you are not fully booked.


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## Gunslinger (Aug 3, 2007)

OK, I "think" I can get my head around this. My choice would be ... B.

Time is money, and as you stated ... the bottom line is what it is.

Interesting exercise, Fred!


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