Over a four-week period the operations section collected information on inputs a
ID: 416663 • Letter: O
Question
Over a four-week period the operations section collected information on inputs and output. As a favor to you they formatted the information into the following table.
Each employee worked a 40-hour week. Overhead (which includes all other expenses) is 150 percent of the labor cost. Wages are $17 per hour. Materiel costs $7 per pound. The standard revenue for the output is $150 per unit. Compute the multi-factor productivity for each week. Do the productivity figures suggest anything (e.g., trends)? Explain.
Week Output (#units) # employees Material (pounds) 1 301 6 45 2 338 7 46 3 322 7 46 4 354 8 48Explanation / Answer
Total cost for any week
= Labor cost + Overhead cost + Material cost
= Labor cost + 1. x 50Labor cost + Material cost
= 2.50 x Labor cost + Material cost
= 2.50 x Wages/ hour x Number of hours/ week x Number of employees + Material cost / Pound x Quantity of Material ( Pounds)
= 2.5 x 17 x 40 x Number of employees + 7x Quantity of Material ( Pounds)
= 1700 x Number of employees + 7 x Quantity of material ( Pounds )
Total revenue for any week = Revenue/ unit x Number of units of output = 150 x Number of units of output
Therefore ,
For week 1 :
Total revenue, $ = 150 x 301 = $45150
Total cost , $ = 1700 x 6 + 7 x 45 = 10200 + 315 = 10515
Multifactor productivity = Total revenue / Total cost = 45150 /10515 = 4.293
For week 2 :
Total revenue, $ = 150 x 338 = $ 50700
Total cost , $ = 1700 x 7 + 7 x 46 = 11900 + 322 = 12222
Multifactor productivity = Total revenue / Total cost = 50700/12222 = 4.148
For week 3 :
Total revenue, $ = 150 x 322 = $ 48300
Total cost , $ = 1700 x 7 + 7 x 46 = 11900 + 322 = 12222
Multifactor productivity = Total revenue / Total cost = 48300 /12222 = 3.951
For week 4 :
Total revenue, $ = 150 x 354 = $ 53100
Total cost , $ = 1700 x 8 + 7 x 48 = 13600 + 336 = 13936
Multifactor productivity = Total revenue / Total cost = 53100 / 13936 = 3.810
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