Your company makes common coffee mugs and you purchased new equipment to improve

Question

Your company makes common coffee mugs and you purchased new equipment to improve labor productivity.

For the last few years, your production line consisted of six workers earning $12.15 per hour making a total of 608 cups per hour. The original machines cost $189 per hour to operate.

With the new equipment, you now operate with only five workers earning of $14.00 per hour. The new equipment costs $238 per hour which allows you to produce a total of 622 cups per hour.

Calculate the multifactor productivity measure for before and after the new equipment (i.e., mugs per dollar cost). Enter the percentage change in productivity as your answer. (Keep two decimal places)

Explanation / Answer

Multifactor productivity = Number of mugs per hour/(Number of labor*Labor cost per hour + Equipment cost per hour)

Multifactor productivity for old equipment = 608/(12.15*6 + 189) = 2.32

Multifactor productivity for new equipment = 622/(14*5 + 238) = 2.02

% change in multifactor productivity = (2.02 - 2.32)/2.32 = -12.93%

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