Q. 10 In an effort to reduce their tot... [FREE SOLUTION]

Chapter 22: Q. 10 (page 508)

In an effort to reduce their total costs, many companies are now replacing paychecks with payroll cards, which are stored-value cards onto which the companies can download employees' wages and salaries electronically. If the only factor of production that a company varies in the short run is the number of hours worked by people already on its payroll, would shifting from paychecks to payroll cards reduce the firm's total fixed costs or its total variable costs? Explain your answer.

Short Answer

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As a result, If a company saves money by using payroll instead of paychecks, it is lowering its fixed costs of production and it is regarded as a firm's fixed cost. If a company saves money by using payroll instead of paychecks, it is lowering its fixed costs of production.

Step by step solution

Step: 1 Introduction:

People can use payment cards to pay expenses and purchase online. Payroll vouchers could also be used to pay bills automatically. Employees using payroll cards may also withdraw cash from ATMs, much like those with bank accounts and debit cards.

Step: 2 Payroll card:

The switch from cheques to payroll card is anticipated to lower the overall fixed cost of the company. A company's fixed costs can be reduced if it uses payroll that is depend on the amount of hours worked. Payroll rather than paycheck might help you save money on your salary.

Step: 3 Firm's total fixed costs:

The amount of productivity is unaffected by the monthly compensation received by employees via paycheck. As a result, it is regarded as a firm's fixed cost. If a company saves money by using payroll instead of paychecks, it is lowering its fixed costs of production.