Concept explainers
a)
To compute: The labor productivity and multifactor productivity for each unit.
Introduction: Labor productivity is the measure of productivity of a worker during a period of time. It the ratio of total output to the total productivity hours.
a)
Answer to Problem 7P
Explanation of Solution
Given information:
Unit | Employees | Customer processed/day |
A | 4 | 36 |
B | 5 | 40 |
C | 8 | 60 |
D | 3 | 20 |
Formula:
Calculation of multifactor productivity:
Unit | Employees | Customer processed/day | Labor cost | Overhead cost | Material cost | Total cost | Labor productivity | MFP (2decimal) | MFP (3decimal) |
A | 4 | 36 | 800 | 800 | 180 | 1780 | 9 | 0.02 | 0.020 |
B | 5 | 40 | 1000 | 1000 | 200 | 2200 | 8 | 0.02 | 0.018 |
C | 8 | 60 | 1600 | 1600 | 300 | 3500 | 7.5 | 0.02 | 0.017 |
D | 3 | 20 | 600 | 600 | 100 | 1300 | 6.6666667 | 0.02 | 0.015 |
Table 1
Excel Worksheet:
Calculation of multifactor productivity:
Unit A:
Labor cost is calculated by multiplying number of workers (4) with 8working hours and 25 hourly wages which gives 800.
Overhead cost is calculated by multiplying Labor cost of 800 with 1.0 which gives 800.
Material cost is calculated by multiplying 36 with 5 which gives 180.
Total cost is calculated by adding labor cost of 800, overhead cost of 800 and material cost of 180 which yields 1780.
Labor productivity is calculated by dividing 36 with 4 which yields 9.
Multifactor productivity is calculated by dividing 36 with the total cost of 1,780 which yields 0.02 (2-decimal) and 0.020 (3 decimal).
Same procedure is followed for unit B, C and D the result is shown in table 1.
Hence, multifactor productivity has dropped from 0.020 to 0.015.
b)
To compute: The labor productivity and multifactor productivity for each unit.
Introduction: Multifactor productivity is also referred as total factor productivity. It is the measure of economic performance by comparing the amount of goods and services produced to the total input used to produce the output.
b)
Answer to Problem 7P
Explanation of Solution
Given information:
Every employee process on additional customers.
Unit | Employees | Customer processed/day |
A | 4 | 40 |
B | 5 | 45 |
C | 8 | 68 |
D | 3 | 23 |
Formula:
Calculation of multifactor productivity:
Unit | Employees | Customer processed/day | Labor cost | Overhead cost | Material cost | Total cost | Labor productivity | MFP (2decimal) | MFP (3decimal) |
A | 4 | 40 | 800 | 800 | 200 | 1800 | 10 | 0.02 | 0.022 |
B | 5 | 45 | 1000 | 1000 | 225 | 2225 | 9 | 0.02 | 0.020 |
C | 8 | 68 | 1600 | 1600 | 340 | 3540 | 8.5 | 0.02 | 0.019 |
D | 3 | 23 | 600 | 600 | 115 | 1315 | 7.6666667 | 0.02 | 0.017 |
Table 2
Excel Worksheet:
Calculation of multifactor productivity:
Unit A:
Labor cost is calculated by multiplying number of workers (4) with 8 working hours and 25 hourly wages which gives 800.
Overhead cost is calculated by multiplying Labor cost of 800 with 1.0 which gives 800.
Material cost is calculated by multiplying 40 with 5 which gives 200.
Total cost is calculated by adding labor cost of 800, overhead cost of 800 and material cost of 200 which yields 1800.
Labor productivity is calculated by dividing 40 with 4 which yields 10.
Multifactor productivity is calculated by dividing 40 with the total cost of 1,800 which yields 0.02 (2-decimal) and 0.022 (3 decimal).
Same procedure is followed for unit B, C and D the result is shown in table 2.
Hence, multifactor productivity has dropped from 0.022to 0.017.
Want to see more full solutions like this?
Chapter 2 Solutions
Operations Management
- White Tiger Electronics produces CD players using an automated assembly line process. The standard cost of CD players is $150 per unit (labor, $30; materials, $70; and overhead, $50). The sales price is $300 per unit.a. To achieve a 10 percent multifactor productivity improvement by reducing materials costs only, by what percentage must these costs be reduced? b. To achieve a 10 percent multifactor productivity improvement by reducing labor costs only, by what percentage must these costs be reduced? c. To achieve a 10 percent multifactor productivity improvement by reducing overhead costs only, by what percentage must these costs be reduced?arrow_forwardAssume you are Operations Manager in company, which produces furniture.A. Identify the nature of your output (Is it service or product?).B. Identify the degree of customer contact in the company (will it be high or low?). Explain.C. Identify how difficult or easy it would be for you to measure productivity in the furnitureproducing company. Explain.arrow_forwardThe following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $25, the overhead rate is 1.0 times labor cost, and material cost is $5 per customer. PLEASE SHOW WORK, SO I CAN UNDERSTAND THE STEPS. Unit Employees Customers Processed/Day A 4 36 B 5 40 C 8 60 D 3 20 Compute the labor productivity for each unit (Unit A, B, C, and D) Use an eight-hour day for multifactor productivity. Compute the multifactor productivity for each unit (Unit A, B, C, and D)arrow_forward
- At Symbiotech, the output of a process is valued at $30 per unit. The cost of labor is $70 per hour including benefits. The accounting department provided the following information about the process for week 1: Units produced = 2,300, Labor ($) = 14,500, Material ($) = 22,700, Overhead ($) = 10,270. The multifactor productivity ratio for week 1 is: C. 4.76 A. 1.46 B. 0.049 D. 2.79arrow_forwardSud and Duds Laundry washed and pressed the followingnumber of shirts per week: a. Calculate the labor productivity per hour for each week.b. Explain the labor productivity patter exhibited by the data.arrow_forwardA wrapping paper company produced 2,000 rolls of paper one day. Standard price is $0.75/roll. Labor cost was $ 160, material cost was $ 50, and overhead was $ 320. Determine the multifactor productivity in terms of dollars of output per dollars of inputarrow_forward
- 1. Cardinal Inc. makes a variety of electronic products. Its camera manufacturing plant is considering choosing between two different processes named Alpha and Beta, which can be used to make two component parts A and B. To make the correct decision, the managers would like to compare the multi-factor productivity of process Alpha with that of process Beta. The value of process output for component A and B are $175 and $150 per unit, respectively. The corresponding overhead cost is $6,000 for Alpha process and $5,000 for Beta process. The table below presents detailed information. Process Alpha Process Beta Product A Product B Product A Product B Output (units) 60 60 40 80 Labor ($) $1200 $1400 $1000 $2000 Material ($) $2500 $3000 $1500 $3500 Please answer the following questions: a. Please compute the multifactor productivity for process Alpha and Beta. Which process, Alpha or Beta, is more productive? Which one…arrow_forwardThe following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $25, the overhead rate is 1.0 times labor cost, and material cost is $5 per customer. Compute the labor productivity and the multifactor productivity for each unit. Use an eight-hour day for multifactor productivity. Unit Workers Customers Processed/Days A 4 36 B 5 40 C 8 60 D 3 20arrow_forwardA factory produces 7,500 units of car replacement component per month which can be sold at the price of $50/unit. The monthly labor cost is $1,050, material cost is $5,200, and overhead cost is 15% of the material cost. Compute the different productivity measure you can conclude, and specify who may be interested in each measure.arrow_forward
- A manufacturing company produces 500 units of a product in an 8-hour shift, using tenworkers. Each worker is paid $20 per hour. The total cost of raw materials for theproduction is $2,500.a. Calculate the single-factor productivity for the given production process.b. Calculate the multi-factor productivity for the given production process.arrow_forwardSuppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. a. What is the current labor cost per car sold? b. Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? c. Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? d. If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…arrow_forwardEasy Electronics produces CD players using an automatedassembly line process. The standard cost of CD players is$139 per unit (labor, $28; materials, $66; and overhead, $45).The sales price is $275 per unit. a. To achieve a 12 percent multifactor productivity improve-ment by reducing materials costs only, by what percent-age must these costs be reduced?b. To achieve a 12 percent multifactor productivity improve-ment by reducing labor costs only, by what percentagemust these costs be reduced?c. To achieve a 12 percent multifactor productivity improve-ment by reducing overhead costs only, by what percent-age must these costs be reduced?arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill EducationOperations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningProduction and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.