The weekly output of a fabrication process is shown below together with data for
ID: 403512 • Letter: T
Question
The weekly output of a fabrication process is shown below together with data for labor and material inputs. Standard selling price is $100 per unit. Overhead is charged weekly at the rate of $2000. Assume a 40-hour week and an hourly wage of $14. Material cost is $8 per foot.
Week Output # Workers Material (feet)
1 420 6 1000
2 375 5 1000
a. (1) What is the Multifactor Productivity for Week 1 and Week 2?
b. (1) What is the Labor productivity for Week 1 and Week 2?
c. (1) Is the business Better Off or Worse Off in Week 2? Why or Why not?
Explanation / Answer
Labor cost for week 1 = 40 x 14 x 6 = 3360
multifactor productivity for week 1
= (quantity produced *standard price)/(labourcost+material cost+ overhead)
=(420 * 100 )/(3360+1000*8+2000)
=3.69
Labor cost for week 2 = 40 x 14 x 5 = 2800
multifactor productivity for week 2
=(quantity produced *standard price)/(labourcost+material cost+ overhead)
=(375 * 100 )/(2800+1000*8+2000)
=2.93
labour productivity of week 1 = 420/(6*7)=10 outputs/day
labour productivity of week 2 = 375/(5*7)=10.7=11 outputs/day
week 2 is better off because it needs less workers labour cost is also less and labour productivity is more per day
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