Productivity: A garment manufacturer produces various types of casual wears, inc

Question

Productivity:

A garment manufacturer produces various types of casual wears, including T-shirts, trousers, and shorts. The company has 24 direct labour employees. All 24 employees are skilled workers to produce all three products. An employee who produced T-shirt received $60 per hour, an employee who produced trousers received $100 per hour, and an employee who produced shorts received $50 per hour.

In addition, the direct material cost of T-shirt is $100 per unit; the direct material cost of trousers is $200 per unit, and the direct material cost of shorts is $30 per unit. The annual overhead expense incurred in operating the production plant is $5; 000 per working day.

In June, the company produced 600 T-shirts at $250 per unit, 1,000 trousers at $750 per unit, and 2,000 shorts at $100 per unit. There were 26 working days in June, during which T-shirts were produced in 9 working days (of 10 hours each), trousers in 10 days, and shorts in 7 days.

1. Determine the labour productivity of the company in June. [5 marks]
2. Determine the multi-factor productivity of the company in June. [7 marks]
3. What is the interpretation of the multi-factor productivity? [3 marks]

In July, the company adopted a new system to produce 1,000 T-shirts in 10 working days and 1,200 trousers in 10 days. The company adopted the current system to produce 1,500 shorts in remaining 6 days. There were 26 working days in July. The labour cost per hour in all three products was increased by 10%. Assume the selling prices and the material costs of the three products as well as the overhead expense for operating the production plant remain unchanged.

4. What was the percentage change of multi-factor productivity from June to July? [10 marks]
Note: For all the calculation of productivity ratios, you are required to use the dollar values.

please help me. Thanks very much.

Explanation / Answer

MC = Multifactor productivity for June and july are compared.

June T shirt Trousers Shorts L Labor rate ($/Hr) 60 100 50 D DM cost rate ($/unit) 100 200 30 OH OH 130000 (5000*26) U Units 600 1000 2000 P Per unit 250 750 100 R = P*U Revenue 150000 750000 200000 T Time hrs 90 100 70 LC= L*T Labor cost 5400 10000 3500 LP = R/LC Labor Prod 27.77778 75 57.14286 Ans1 DC=D*U DM Cost   60000 200000 60000 OC=13000*T/260 OH Cost 45000 50000 35000 (Apportioned to hours used) TC Total cost 110400 260000 98500 (Revenue/Cost)    MC = R/TC Multifactor Prod 1.358696 2.884615 2.030457 Ans 2 Ans 3 The interpretation of the Multifactor Productivity is the best return is provided by Trousers followed by Short followed by the least one which is T-shirts. Formulae used July T shirt Trousers Shorts L (1.1*June rates) Labor rate ($/Hr) 66 110 55 D DM cost rate ($/unit) 100 200 30 OH OH 130000 U Units 1000 1200 1500 P Per unit 250 750 100 R = P*U Revenue 250000 900000 150000 T Time hrs 100 100 60 LC= L*T Labor cost 6600 11000 3300 LP = R/LC Labor Prod 37.87879 81.81818 45.45455 DC=D*U DM Cost   100000 240000 45000 OC=13000*T/260 OH Cost 50000 50000 30000 TC Total cost 156600 301000 78300 (Revenue/Cost) MC = R/TC Multifactor Prod 1.596424 2.990033 1.915709 Ans 4 C MC july-MC June Change 0.237728 0.105418 -0.11475 C/MC June Percentage change 17.50% 3.65% -5.65% Ans 4

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