In last month, Steakhouse Americus, a pizza order delivering food store, sold 1,

Question

In last month, Steakhouse Americus, a pizza order delivering food store, sold 1,000
“Works” pizzas, with price of $18 each. There were six employees working full time in last month, on a regular 8-hour per day schedule. Hourly wage rate is $10 per person.
Materials used for making each pizza (including allocated overhead expenditures) cost of $5.5. In this month, as the business grows and to satisfy the demand increase,
Steakhouse Americus hired one more part time person to work 4 hours a day, with hourly wage rate of $15. Full time employees are paid with the same wage rate as in the last
month. In total 1,200 pizzas have been sold in this month, with same price as that in last month. Materials costs for making each pizza increased to be $6 due to higher overheads. Ignoring other expenditures, assume the steakhouse opens 26 days per month, please use appropriate measure to compare the productivities in last month and this one. (Hint: calculate the productivities of both month, and calculate the growth rate.)

Explanation / Answer

(a) Previous month Fixed Cost = no.of employees * Wage per employee wages paid to an employ in 1 month = No. of day * Hours worked per day * wage per hr. wages per employee = 26 * 8 * 10 = $ 2080 Fixed cost = 6 * 2080 = $ 12480 variable cost = no. of units sold * materials cost of each unit = 1000 * 5.5 = $ 5500 Total cost = fixed cost + variable cost = 12480 + 5500 = 17980 Total revenue = No. of units sold * value of each unit = 1000*18 = 18000 Productivity = Revenue / production cost = 18000/17980 = 1.0011 (b) present month Fixed cost = previous month fixed cost + cost due to extra employee Cost due extra employee = 26 * 15 *4 = $ 1560 Fixed cost = 12480 +1560 = $ 14040 variable cost = no. of units sold * materials cost of each unit = 1200 * 6 = $ 7200 Total cost = fixed cost + variable cost = 14040 + 7200 = $ 21240 Total revenue = No. of units sold * value of each unit = 1200 * 18 = $ 21600 Productivity = Total revenue/Total production cost = 21600/21240 = 1.017 Growth rate of productivity = (1.017 - 1.0011)/1.011*100 = 1.57 %

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