You work in the Economic Planning Department of a consultants, Econ Consult. You have been asked by the Managing Director to work in a small group with 3 other people to write a response to the following enquiry.

Company Name : We need to know
Contact Name : Dr J Jack
Company Address : Room 101, 77 Old Road, Bath, NW29

Could you advise the firm on the likely consequences of the following;

Changes in the Labour Market

Likely changes in the labour market suggest that the firm can renegotiate the employment contracts. The following proposal is recommended;

• Increase employing office staff to 3 people
• Increase the office staff salary to £22500
• Increase operatives staff salary to £25000
• Decrease operatives bonus to 0.20

Comment on the impact on the firm; its profits, break-even mileage and the new margin of safety.

If the fixed costs increase while the variable costs decrease and output remained constant, the margin of safety. Would you recommend accepting the proposal?

Your findings need to be presented in two ways, the first will be as a written report with covering letter, second will be as a question and answer session on the content of the report.

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