QUESTION: (Answer as soon as possible.) A company that makes shopping carts for
ID: 397183 • Letter: Q
Question
QUESTION: (Answer as soon as possible.)
A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 5 workers, who together produced an average of 60 carts per hour. Workers receive $14 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $12 per hour while output increased by 4 carts per hour.
a. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 3 decimal places.)
b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 3 decimal places.)
c. Comment on the changes in productivity according to the two measures. Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places.
Explanation / Answer
Total hourly cost under any option
= Wages per hour per worker x Number of workers + Hourly machine cost
Therefore,
Total cost under using old equipment
= $14 x 5 + $40
= $110
Number of workers after introduction of new equipment
= 5 - 1 ( transfer )
= 4
Equipment ocst = $40 +$12 = $52
Revised hourly output = 60 + 4 = 64
Total cost using new equipment
= $14 x 4 + $52
= $56 + $52
= $108
Answer to question a :
Labour productivity = Hourly output / Number of workers deployed
Therefore,
Labour productivity – Before = 60 / 5 = 12
Labour productivity – after = 64 / 4 = 16
Before
12 carts per worker per hour
After
16 carts per worker pr hour
Answer to question b :
Multifactor productivity = Hourly output / Hourly total cost
Multifactor productivity – before = 60 / $110 = 0.545 Carts per Dollar cost
Multifactor productivity – After = 64 / $108 = 0.592 carts per Dollar cost
Before
0.545 Carts per Dollar cost
After
0.592 Carts per Dollar cost
Answer to question c :
Change in labour productivity
=( Labour productivity after – Labour productivity before )/ Labour productivity before x 100
= ( 16 – 12 ) / 12 x 100
= 4/12 x 100
= 33.33% increase
Change in multifactor productivity
= ( Multifactor productivity after – Multifactor productivity before) / Multifactor productivity before x 100
= ( 0.592 – 0.545)/0.545 x 100
= 0.047 / 0.545 x 100
= 8,62 %
Labor productivity
Increased by 33.33%
Multifactor productivity
Increased by 8.62%
Before
12 carts per worker per hour
After
16 carts per worker pr hour
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