A company that makes shopping carts for supermarkets and other stores recenty pu

Question

A company that makes shopping carts for supermarkets and other stores recenty purchased some new Prior to buying equipment that reduces the labor content of the jobs needed to produce the shopping carts new equipment, the company used 5 workers, who together produced an average of 70 carts per hour and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $11 per hour while output increased by 5 carts per hour. a. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 2 decimal places.) Before carts per worker per hour After carts per worker per hour b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 2 decimal places.) Before carts/dollar cost After carts/dollar cost c. Comment on the changes in productivity according to the two measures. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" signs in your response.) Labor productivity (Click to select) by Multifactor productivity (Click to select) by

Explanation / Answer

Question a)

Prior to buying equipment

Labor cost = 12*5 = $60

Number of carts = 70

Labor productivity = 70/60 = 1.17

After buying equipment

Labor cost = 12*4 = $48

Number of carts = 75

Labor productivity = 75/48 =1.56

Question b)

Prior to buying equipment

Labor cost = 12*5 = $60

Machine cost = $40

Total cost = 60+40 = $100

Number of carts = 70

Multifactor productivity = Number of carts/Total cost = 70/100 = 0.7

After buying the equipment

Labor cost = 12*4 = $48

Machine cost = $51

Total cost = 48+51 = 99

Number of carts = 75

Multifactor productivity = 75/99 = 0.76

Question c)

Labor productivity increases by (1.56-1.17)*100/1.17 = 33.3%

Multifactor productivity increases by (0.76-0.7)*100/0.7 = 8.57%

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