a) What is the labor productivity per labor-hour for these tires = ___ tires/lab

Question

a) What is the labor productivity per labor-hour for these tires = ___ tires/labor hour (round your response to two decimal places).

b) What is the multifactor productivity for these tires at Lakefront Manufacturing? (round to four decimal places)

c) What is the percent change in multifactor productivity if Fok can reduce the energy bill by $1,000 per day without cutting production or changing any other inputs? (enter response as percentage rounded to two decimal places)

Lillian Fok is president of Lakefront Manufacturing, a producer of bicycle tires. Fok makes 1,200 tires per day with the following resources: Labor Raw Material: 20,000 pounds per day Energy: Capital: 400 hours per day $12.00 per hour $1.50 per pound $5,250 per day

Explanation / Answer

a) Labor = 400 hours at $12 per hour = 400*12 = $4800

Tires= 1200

Labor Productivity = Output/Labor cost = 1200/4800 = .25 tires/dollar

b) Raw material = 20,000 pounds at $1.5 per pound = 20,000*1.5 = 30,000$

Energy = $5250

Total Cost = 4800 + 30,000 + 5250 = 40,050$

Multifactor productivity = Total Output/(Labor cost + Material + Energy cost) = 1200/40,050 = .02996 tires/dollar = .0300 tires/dollar

New total cost with energy bill = 1000$

Total cost = 4800 + 30,000 + 1000 = 35,800$

Multifactor productivity = 1200/35,800 = .0335

Percentage change in multifactor productivity = (.0335 - .0300)/.0300 = 11.67%

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