2. (3 pts) Sweet Tooth Inc., a leading chocolatier, can produce 100 lbs of choco

Question

2. (3 pts) Sweet Tooth Inc., a leading chocolatier, can produce 100 lbs of chocolate powder from 1000 lbs 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. How did automation affect labor and multifactor productivity?

f. Should Sweet Tooth Inc. continue with the existing process or switch to the new process?

Show your work.

Explanation / Answer

a) Labor productivity of current process = Chocolate power output/Processing hours = 100/10 = 10 lbs per hour

b) Labor productivity of proposed process = 200/15 = 13.33 lbs per hour

Multifactor productivity = Chocolate powder output/(Cost of beans*Qty of Cocoa beans + Processing hours*Processing cost)

c) Multifactor productivity of current process = 100/(1000*6.8 + 10*25) = 0.014 lbs per dollar

d) Multifactor productivity of proposed process = 200/(1800*6.8 + 15*25) = 0.016 lbs per dollar

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