A service unit of Soutwest Bank has 10 employees. Each employee receives $20 per

Question

A service unit of Soutwest Bank has 10 employees. Each employee receives $20 per hour. Each employee works 8 hours per day. The overhead cost is 1.5 times the labor cost. The service unit processes 100 customers per day. The material cost is $10 per customer. What is the total factor productivity for the service unit. Use customers processed per dollar spent on labor, overhead, and material as the measure of total factor productivity.

a. 0.1 Customer processed per dollar

b. 0.02 ...

c. 0.0625 ...

d. 0.0417 ...

e. 0.025 ...

Explanation / Answer

Let's calculate our costs per day:

Labor = 8 hours * 10 employees *$20 = $1600

Overhead = 1.5 * labor cost = $2400

Material = $10 * 100 = $1000

Total cost = $1600 + $2400 + $1000 = $5,000

Total Factor Productivity = Customers Processed / Total Cost = 100/5000 = 0.02

Hence, answer is b.

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