4. The output of a process is valued at $100 per unit. The cost of labor is $50

ID: 382841 • Letter: 4

Question

4. The output of a process is valued at $100 per unit. The cost of labor is $50 per hour including benefits. The accounting department provided the following informa- tion about the process for the past four weeks: Week 1 Week 2 Week 3 Week 4 Units Produced Labor ($) Material ($) Overhead (S) 981 12,735 14,842 10,603 9,526 21,041 24,523 20,442 18,364 8,992 10,480 8,736 7,848 1,124 1,310 1,092 Use the multifactor productivity ratio to see whether recent process improvements had any effect and, if so, when the effect was noticeable. a. b. Has labor productivity changed? Use the labor pro- ductivity ratio to support your answer.

Explanation / Answer

Please find below table which calculates and presents multifactor productivity and labour productivity for each year :

Period

Week 1

Week 2

Week 3

Week 4

Value of units produced ( $)

112400

131000

109200

98100

Labour ( $)

12735

14842

10603

9526

Material ( $)

21041

24523

20442

18364

Overhead ($)

8992

10480

8736

7848

Total input value , $ ( Labour + Material + Overhead)

42768

49845

39781

35738

Multifactor productivity ( Value of units produced/ Total input value)

2.63

2.75

2.74

Labour productivity ( Value of units produced / Labour , $)

8.83

10.30

As would be seen that multifactor productivity has an improving trend when it has started as 2.63 in m value , increased and ended at 2.74

The process is noticeable when the value increased from 2.63 to 2.75 maximum during week 3

Labour productivity also has an improving trend since it has increased from 8.83 to 10.30