Mack\'s guitar fabrication shop produces low cost, highly durable guitars for be

Question

Mack's guitar fabrication shop produces low cost, highly durable guitars for beginners. Typically, out of the 100 guitars that begin production each month, only 80 percent are considered good enough to sell. The other 20 percent are scrapped due to quality problems that are identified after they have completed the production process. Each guitar sells for $250. Because some of the production process is automated, each guitar only requires 10 labor hours. Each employee works an average of 160 hours per month. Labor is paid at $10 per hour, materials cost is $40 per guitar, and overhead is $4,000 a. The labor productivity ratio for Mack's guitar fabrication shop is per hour. (Entor your response rounded to two decimal plecos,)

Explanation / Answer

Answer: Labor Productivity Ratio = $20 / hour. Refer the below calculation for the same.

Output Total Produced Guitar (in Nos.) 100 OK Guitar (in Nos.) 80 Not OK Guitar (in Nos.) 20 Selling Price per Guitar $250 Total Sale Value $20,000 Inouts Labor Hour per Guitar 10 Total Labor Hours for 100 Guitar (i.e. for whole Month) 1000 Hours Employee work per month 160 Labor Paid per Hour $        10.00 Material Cost per Guitar $        40.00 Number of employees works in a month = Total Hour/Unit month hour of employee 6.25 Total Labor Cost per month= Total Guitar*(Unit Guitar Hours)*Unit Hour Labor Rate $      10,000 Total Material Cost per month=Unit Guitar Cost*Total Guitar $         4,000 Overhead Expense $         4,000 Total Cost for the Month = Material+Labor+Overhead 18000 Productivity Ration = Output (in Value)/Input in value) = $20000 /$18000 =1.11 Productivity Ratio = Output (in Value)/Total Input labor hours = $20000 /1000 =$20/hour

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