Linda\'s cakes in July made 250 cakes using 5 workers. In August. Linda\'s made

Question

Linda's cakes in July made 250 cakes using 5 workers. In August. Linda's made 290 cakes using 6 workers. The workers work 40 hours per week and 4 weeks per month. The average revenue per cake is $500. Each employee makes $10 per hour. The cost of supplies for the cake is $150. The cost of the equipment is $600 per month. A) Calculate the labor productivity for both months in terms of cakes per person per hour. B) Calculate the multifactor productivity for both months using cake revenue as your output and labor cost, supply cost, and equipment cost as your inputs. C) Calculate the percentage change in the labor productivity from July to August.

Explanation / Answer

A) In contrast to the labor productivity ratio that represents output per unit of labor, the multifactor productivity ratio relates output per unit of a combined set of inputs.

labour productivity in july = 250/(5 X 40 X 4) = 0.3125

labour productivity in Aug = 290/(6 X 40 X 4) =0.3020

multifactor productivity in July = (250 X 500)/( 250X150 + 600 + 5X4X40X10) = 2.7115

multifactor productivity in July = (290 X 500)/( 290X150 + 600 + 6X4X40X10) = 2.70

% change in labour productivity = (0.3125-0.3020)/0.3125 =3.36%

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