The output of a process is valued at $100 per unit. The cost of labor is $50 per
ID: 2401446 • Letter: T
Question
The output of a process is valued at $100 per unit. The cost of labor is $50 per hour. The accounting department provided the following information about the process for the past two weeks:
Week 1
Week 2
Units Produced
1,124
981
Labor (hours)
255
191
Material ($)
21,041
18,364
Overhead ($)
8,992
7,848
Use the multifactor productivity ratio to see whether recent process improvements had any effect and, if so, how much was the effect.
Has labor productivity changed? Use the labor productivity ratio to support your answer.
Week 1
Week 2
Units Produced
1,124
981
Labor (hours)
255
191
Material ($)
21,041
18,364
Overhead ($)
8,992
7,848
Explanation / Answer
Solution:
(a) multifactor productivity ratio
= Total output / ( Labour + material + overhead)
Week1
= (1,124 x$100) / ( 255x $50 + $21,041 + $8,992)
= $112,400 / $42,783
= 2.63
Week2
= (981x $100) / (191x $50+ $18,364 $7,848)
= 98,100 / $35,762
= 2.74
Hence, there is increase in productivity of 0.11
(b) Labour productivity ratio
= labour hours per week / output per week
Week 1
= 255 /1,124
= 0.23 hour per unit
Week 2
= 191/ 981
= 0.19 hour per unit
Hence, labour productivity has changed from 0.23 to 0.19.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.