Sweet Tooth Inc., a leading chocolatier, can produce 100 lbs of chocolate powder
ID: 397567 • Letter: S
Question
Sweet Tooth Inc., a leading chocolatier, can produce 100 lbs of chocolate powder from 1000 lb of cocoa beans in 10 hours of processing. Not satisfied with this output, the company is contemplating switching to a more automated process that would yield 200 lbs of chocolate powder per 1800 lbs of cocoa beans and take 15 hours to process. The cost of processing is $25 per hour. Cocoa beans cost $6.80 per lb. Calculate: a. The labor productivity of the current process b. The labor productivity of the proposed process c. The multifactor productivity of the current process d. The multifactor productivity of the proposed process e. Should Sweet Tooth Inc. continue with the existing process or switch to the new process?Explanation / Answer
a. Labor productivity of the current process = Output / Labor input = 100 lbs / 10 hours = 10 lb per hour
b. Labor productivity of the proposed process = Output / Labor input = 200 lbs / 15 hours = 13.3 lb per hour
c. Multifactor productivity of the current process = Output / Total input cost = 100 lbs / (10*25+1000*6.8) = 0.0142 lb per $
d. Multifactor productivity of the proposed process = Output / Total input cost = 200 lbs / (15*25+1800*6.8) = 0.0159 lb per $
e. Sweet Tooth Inc. should switch to the new process, because that gives higher labor productivity as well as multifactor productivity.
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