QUESTION 1 A Company that makes shopping carts for supermarkets and other stores

Question

QUESTION 1 A Company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 6 workers, who produced an average of 85 carts per hour. Workers receive $13 per hour, and machine coast was $45 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $14 per hour while output increased by four carts per hour. a) Compute the multifactor productivity (MFP) (labor plus equipment) under the Prior to buying the new equipment. The MFP (carts/S)- (round to 4 decimal places). b) Compute the productivity changes between the Prior to and after buying the new equipment. The productivity growth- % (round to 2 decimal places) QUESTION 2 Compute the multifactor productivity measure for an 8 hour day in which the usable output was 653 units, produced by 7 workers who used 534 pounds of materials. Workers have an hourly wage of 23 and material cost is 5.1 per pound. Overhead is 1.6 times labor cost The multifactor productivity (units S) (round to 4 decimal places) QUESTION 3 A health club has 2 employees who work on lead generation. Each employee works 25 hours a week, and is paid $19 an hour. Each employee identifies an average of 210 possible leads a week from a list of 8,000 names. Approximately 10 percent of the leads become members and pay a one-time fee of S145. Material costs are $260 per week, and overhead costs are $1,335 per week. Calculate the multifactor productivity for this operation in fees generated per dollar of input. The multifactor productivity for this operation in fees generated per dollar of input (round to 4 decimal places)

Explanation / Answer

Question-1

Given values:

Before new equipment purchase

Number of workers = 6

Output produced = 85 carts per hour

Labor wage = $13 per hour

Machine cost = $45 per hour

After new equipment purchase

Number of workers = 5

Output produced = 89 carts per hour

Labor wage = $13 per hour

Machine cost = $59 per hour

Solution:

(a) Multi-factor productivity (MFP) prior to buying the new equipment is calculated as;

MFP = Number of carts produced / (Total labor cost + Total equipment cost)

MFP = 85 / [($13 x 6) + $45]

MFP = 85 / 123

MFP prior to buying the new equipment = 0.6911 carts/$

(b) The % growth in productivity between the prior to and after buying the new equipment is calculated as;

Growth in productivity = [(Productivity after purchase - Productivity before purchase) / Productivity before purchase] x 100

Multi-factor productivity (MFP) after buying the new equipment is calculated as;

MFP = Number of carts produced / (Total labor cost + Total equipment cost)

MFP = 89 / [($13 x 5) + $59]

MFP = 89 / 124

MFP after buying the new equipment = 0.7177 carts/$

Putting the calculated values in the above formula, we get;

Growth in productivity = [(0.7177 - 0.6911) / 0.6911] x 100

Growth in productivity = (0.0266 / 0.6911) x 100

Growth in productivity = 3.85%

Question-2

Given values:

Usable output = 653 units

Number of working hours = 8

Number of workers = 7

Labor wage = $23 per hour

Total labor cost = $23 x 7 x 8 = $1,288

Material used = 534 pounds

Material cost = $5.1 per pound

Total material cost = $5.1 x 534 = $2,723.4

Overhead = 1.6 times labor cost

Total overhead cost = 1.6 x $1,288 = $2,060.8

Solution:

Multi-factor productivity (MFP) is calculated as below:

MFP = Total output / (Total labor cost + Total material cost + Total overhead cost)

MFP = 653 / ($1,288 + $2,723.4 + $2,060.8)

MFP = 653 / 6072.2

MFP = 0.1075 units/$

Question-3

Solution:

Multi-factor productivity (MFP) is calculated as below:

MFP = (Possible leads x Conversion percentage x Number of workers x One-time fee) / (Total labor cost + Total materials cost + Total overhead cost)

MFP = (210 x 10% x 2 x $145) / [(2 x 25 x $19) + $260 + $1355)]

MFP = 6090 / 2565

MFP = 2.3743 fees generated per dollar input

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