Lillian Fok is president of Lakefront Manufacturing, a producer of bicycle tires
ID: 2730628 • Letter: L
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. Labour Productivity: Total Output/Labor Input
=1,000 Tires per day/ 400 hours per day
=2.5 Tyres per hour
b. Multifactor Productivity: Total Output/ Total Input
Total output = 1000 Tires per day
Total Input = (400 Hours X 12 $ /Hour) +( 21000 Pounds/day X 1 $/pound) + 5000 $/day +10,000 $/day
= $48,000+$21,000+$5,000+$10,000
= $40,800
Multifactor Productivity= 1,000 Tyres/ $ 40,800 = 0.0245 tires/$
We will get 0.0245 tires for every dollar we invest on
c. Reduce energy in $ 950: Here we hve to claulcate the multofactor productivity again by taking this new energy cost .
Total Input = (400 Hours X 12 $ /Hour) +( 21000 Pounds/day X 1 $/pound) + 5000 $/day +10,000 $/day
= $4800+$21,000+($5,000-$950)+$10,000
=$39,850
Multifactor Productivity= 1,000 Tyres/ $ 39,850 = 0.0251 tires/$
Original Multifactor productivity= 0.0245tires/$
Now the % change will be = (New Multi factor Productivity - Original Multi factor Productivity)/ Original Multi factor Productivity
=(0.02450.0251) /0.0245
= 2.45%
So the % change is 2.45%
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