QUESTION 1 12 points A Company that makes shopping carts for supermarkets and ot

Question

QUESTION 1 12 points A Company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 4 workers, who produced an average of 87 carts per hour. Workers receive S13 per hour, and machine coast was S32 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by S18 per hour while output increased by four carts per hour. a) Compute the multifactor productivity (MFP) (labor plus equipment) under the Prior to buying the new equipment. The MFP (carts/S) (round to 4 decimal places). b) Compute the % growth in productivity between the Prior to and after buying the new equipment. The growth in productivity (round to 2 decimal places)

Explanation / Answer

1) Before the purchase

After the purchase

a)Multifactor productivity before = output / Total cost = 87 carts / $84 = 1.0357 carts per dollar cost

Multifactor productivity after = output / Total cost = 91 carts / $89 = 1.0225 carts per dollar cost

b) Change in Multifactor productivity = [(Multifactor productivity after - Multifactor productivity before) /Multifactor productivity before] x 100

= [(1.0225-1.0357)/1.0357] x 100

= - 0.0127 x 100

= - 1.27%

Therefore the productivity decreased by 1.27%

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