The following table shows data on the average number of customers processed by s

Question

The following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $25, the overhead rate is 1.0 times labor cost, and material cost is $5 per customer.

a. Compute the labor productivity and the multifactor productivity for each unit. Use an eight-hour day for multifactor
productivity. Show all the work and formula
b. Suppose a new, more standardized procedure is to be introduced that will enable each employee to process one additional
customer per day. Compute the expected labor and multifactor productivity rates for each unit. Show all the work and formula

Unit Employees Customers Processed/Day A 4 36 B 5 40 C 8 60 D 3 20

Explanation / Answer

a. Labor productivity = Output/Labor cost

Output = customers processed in a day. Labor cost = number of employees in a unit*8 hours*hourly wage rate ($25)

Labor productivity = number of customers processed per day/total wages per day

Multifactor productivity = number of customers processed per day/(total wages+overhead+materials cost)

overhead = 1*labor cost. materials cost = $5*number of customers

b. each employee will process one additional customers per day. So unit A will process 4 more to process 36+4 = 40 customers. B will process 40+5 = 45, C will process 60+8 = 68 and D will process 20+3 = 23.

Unit Employees Customers processed per day Hours per day (number of employees*8) Total wage = hours per day*$25 Labor productivity A 4 36 32 800 0.04500 B 5 40 40 1,000 0.04000 C 8 60 64 1,600 0.03750 D 3 20 24 600 0.03333

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