Show work Question 5: The ABC Company has a large order for special uniforms to
ID: 2449608 • Letter: S
Question
Show workQuestion 5: The ABC Company has a large order for special uniforms to be used in an urgent operation. Working the normal two shifts of 40 hours each per week, the ABC production process usually produces 2, 500 uniforms per week at a standard cost of $120 each. Seventy employers work the first shift and 30 the second. The contract price is $200 per uniform. Because of the urgent need, ABC is authorized to sue around-the-clock production, six days per week. When each of the two shifts work 72 hours per week, production increases to 4,000 uniforms per week but at a cost of $144 each.
• Did the multifactor productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?
• Did the labor productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?
• Did weekly profits increase, decrease, or remain the same?
Explanation / Answer
MULTI-FACTOR PRODUCTIVITY Original Value of output 2500 x $200 = $500,000 Value of input 2500 x $120 = $300,000 Multi-factor productivity 500,000/300,000 = 1.67 Overtime Value of output 4000 x $200 = $800,000 Value of input 4000 x $144 = $576,000 Multi-factor productivity 800,000/576,000 = 1.39 Multi-factor productivity (1.67 – 1.39) / 1.67 = 16.8% decrease...Ans (1) LABOR PRODUCTIVITY Original Value of output 2500 x $200 = $500,000 Input = 80 labor force hours Labor productivity $500,000/80 hr = $6,250/hr Overtime Value of output 4000 x $200 = $800,000 Input = 144 labor force hours Labor productivity $800,000/144 hr = $5,556/hr Labor productivity ($6,250/hr – $5,556/hr) / $6,250/hr = 11.1% decrease ...Ans (2) GROSS PROFITS Original $500,000 - $300,000 = $200,000 Overtime $800,000 - $576,000 = $224,000 $24,000 increase Ans (c)
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