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 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 $950 per day without cutting production or changing any other inputs= % (enter your response as a percentage rounded to two decimal places).

Explanation / Answer

Total Costs per day = 400*12 + 21000 *1 + 5000 + 10000 = 40800

Revised Total Cost = 400*12 + 21000 *1 + (5000 - 950) + 10000 = 39850

New Multifactor productivity = 1000 / 39850 = 0.0250

% Change = (0.0250 / 0.0245) - 1 = 2.04%

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