The following table shows data on the average number of customers processed by s
ID: 396658 • Letter: T
Question
The following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $10, the overhead rate is 1.1 times labor cost, and material cost is $4 per customer.
a. Compute the labor productivity and the multifactor productivity for each unit. Use an eight-hour day for multifactor productivity. (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)
b. Suppose a new, more standardized procedure is to be introduced that will enable each employee to process one additional customer per day. Compute the expected labor and multifactor productivity rates for each unit. (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)
Explanation / Answer
Answer to question a :
Labour productivity = Customers processed per day / Number of employees
Labour productivity for unit A = 37/4 =9.25
Labour productivity for unit B = 43/5 = 8.6
Labour productivity for unit C = 55/4 = 13.75
Labour productivity for unit D = 30/2 = 15
We assume there will be 8 hours day
Therefore, wages per employee per day = $10 / hour x 8 hours = $80
Overhead rate per employee per day = $80 x 1.1 = $88
Thus, wages plus overhead rate per employee per day = $80 + $88 = $168
Total cost per day
= Wages plus overhead / employee x Number of employees + Material cost / customer x Number of customers
= $168 x Number of employees + $4 x Number of customers
Therefore,
Total cost for unit A = $168 x 4 + $4 x 37 = $672 + $148 = $820
Total cost for unit B = $168 x 5 + $ 4 x 43 = $840 + $172 = $1012
Total cost for unit C = $168 x 4 + $4 x 55 = $672 + $220 = $892
Total cost for unit D = $168 x 2 + $4 x 30 = $336 + $120 = $456
Multifactor productivity = Customers processed / Total cost
Therefore,
Multifactor productivity for unit A = 37 / 820 = 0.045 per $ input
Multifactor productivity for unit B = 43 / 1012 = 0.042 per $ input
Multifactor productivity for unit C = 55 / 892 = 0.062 per $ input
Multifactor productivity for unit D = 30 / 456 = 0.066 per $ input
Answer to question b :
Revised number of customers :
Unit A = 38
Unit B = 44
Unit C = 56
Unit D = 31
The revised calculations based on revised number of customers as follows :
Labour productivity = Customers processed per day / Number of employees
Labour productivity for unit A = 38/4 =9.50
Labour productivity for unit B = 44/5 = 8.8
Labour productivity for unit C = 56/4 = 14
Labour productivity for unit D = 31/2 = 15,5
We assume there will be 8 hours day
Therefore, wages per employee per day = $10 / hour x 8 hours = $80
Overhead rate per employee per day = $80 x 1.1 = $88
Thus, wages plus overhead rate per employee per day = $80 + $88 = $168
Total cost per day
= Wages plus overhead / employee x Number of employees + Material cost / customer x Number of customers
= $168 x Number of employees + $4 x Number of customers
Therefore,
Total cost for unit A = $168 x 4 + $4 x 38= $672 + $152 = $824
Total cost for unit B = $168 x 5 + $ 4 x 44 = $840 + $176 = $1016
Total cost for unit C = $168 x 4 + $4 x 56 = $672 + $224 = $896
Total cost for unit D = $168 x 2 + $4 x 31 = $336 + $124 = $460
Multifactor productivity = Customers processed / Total cost
Therefore,
Multifactor productivity for unit A = 38 / 824 = 0.046 per $ input
Multifactor productivity for unit B = 44/ 1016 = 0.043 per $ input
Multifactor productivity for unit C = 56 / 896 = 0.063 per $ input
Multifactor productivity for unit D = 31 / 460 = 0.067 per $ input
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