Lillian Fok is president of Lakefront Manufacturing, a producer of bicycle tires

Question

Lillian Fok is president of Lakefront Manufacturing, a producer of bicycle tires. Fok makes 1,000 tires per day with the following resources: Labor: 400 hours per day dollar 12.00 per hour Raw Material: 21,000 pounds per day dollar 1.00 per pound Energy: dollar 5,000 per day Capital: dollar 10, 000 per day Labor productivity per labor hour for these tires = 2.5 tires/labor hour (round your response to two decimal places). Multifactor productivity for these tires = .0245 tires/dollar (round your response to four decimal places). The percent change in multifactor productivity if Fok can reduce the energy bill by dollar 950 per day without cutting production or changing any other inputs = percentage (enter your response as a percentage rounded to two decimal places).

Explanation / Answer

a) Labor productivity = Production / Number of hours required

Number of labor hours required = 400

So, Labor productivity = 1,000 / 400 = 2.5 tires / labor hour

b) Multifactor productivity = Production / Total cost per day

Total Cost per day = Labor cost + Raw material + Energy + Capital

= (400 x $12) + (21,000 x $1) + $5,000 + $10,000

= $40,800

So, Multifactor productivity = 1,000 / $40,800 = 0.0245 tires / dollar of input.

c) New energy bill = Old - Reduction = $5,000 - $950 = $4,050

So, New Total Cost = (400 x $12) + (21,000 x $1) + $4,050 + $10,000 = $39,850

So, Multifactor productivity = 1,000 / $39,850 = 0.0251 tires / dollar of input.

So, percentage change in multifactor productivity = (New - Old) / Old = (0.0251 - 0.0245) / 0.0245 = 2.45%

So, the multifactor productivity will increase by 2.45%

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.