Rate of Cost Examples


Example 1:
It is estimated that labor represents 40%-50% of production costs. Significant rate reductions were made during the period of hostility, and resulted largely from Phelps Dodge's confrontation with its union in 1983. Phelps Dodge became non-union, and it was three years before Phelps Dodge's competitors were able to renegotiate labor contracts. (
Year 1983 – SIC 1021)

Example 2:
While top executives at Barrick receive salaries 5-10% below the industry norm, they can qualify for lucrative stock options if the company does well. The program has already made a number of Barrick executives wealthy. Miners at Barrick can earn an extra 10% above their average annual salary of $40K if they meet monthly production quotas. (
Year 1993-SIC 1041)

Example 3:
Chocolate is still 90% of Hersey's business. Even a surge in the spot price of cocoa won't hurt Hershey much because it has already locked in low-priced cocoa by buying forward in the futures market. (
Year 1990-2000)

Example 4:
Competitors in Texas, Idaho, Mexico and Guatemala, where labor and utility costs can run 50% less than in California, are taking share from the California packing plants. In response the California plants have unilaterally cut wages, shifted production to plants in low cost, non-union plants in the inexpensive parts of the country and world and instituted a two tier wage plan that starts new hires at lower rates than old timers. (
Year 1985-SIC 2038)

Example 5:
Japanese make cars at about $8 or $9/hr labor cost advantage over Big 3. (
Year 1992-SIC 3711)