Question

Help!!!

Business Week, in an article dealing with management, wrote, "When he took over the furniture factory three years ago...[the manager] realized almost immediately that it was throwing away at least $100,000 a year worth of wood scrap. Within a few weeks, he set up a task force of managers and workers to deal with the problem. and within a few months, they reduced the amount of scrap to $7.000 worth [per year]." Was this necessarily an economically efficient move?

Answer 1

It looks like their wood raw material cost was reduced $93,000 per year. A few months of a "task force of managers" probably cost more than that, but since the savings occur year after year, there is probably a net bottom-line benefit. The managers may have been doing other things during the period of the task force. This increases the cost effectiveness of the effort.