Productivity: A garment manufacturer produces various types of casual wears, inc
ID: 400047 • Letter: P
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
Details for Month of June:
Product
T-shirts
Trousers
Shorts
Total
Labor rate per hour
a
$60
$100
$50
Direct Material Cost
b
$100
$200
$30
Annual overhead expense/day
c
$5,000
Units produced
d
600
1000
2000
Price per unit
e
$250
$750
$100
Working Days
f
9.00
10.00
7.00
26.00
Working hour
g
10.00
10
10
Number of workers
h
24
24
24
Total labor hours
i = h*g*f
2160
2400
1680
Total
Total Labor Cost
K = i*a
$129,600
$240,000
$84,000
$453,600
Total Material cost
l = d*b
$60,000
$200,000
$60,000
$320,000
Overhead expenses per month
m = c*5000
$130,000
Total Cost
N
$903,600
Revenue
O
$150,000
$750,000
$200,000
$1,100,000
Total Revenue = $1,100,000
Total Labor cost for June month = $453,600
Labor productivity = Revenue/labor cost = 1,100,000/$453,600 = $2.43
Labor productivity = $2.43
Total production Cost = Total (Labor + Material + overhead) cost = $903,600
Multifactor productivity = Revenue/total production cost = 1,100,000/$903,600= $1.22
Multifactor productivity = $1.22
Interpretation of Multifactor: It explains that for each dollar of investment in labor, material ad overhead leads to $1.22 is profit.
Details for Month of July:
T-shirts
Trousers
Shorts
Total
Labor rate per hour
A
1.1*60
= $66
1.1*100
= $110
1.1*50
= $55
Direct Material Cost
B
$100
$200
$30
Annual overhead expense/day
C
$5,000
Units produced
D
1000
1200
1500
Price per unit
E
$250
$750
$100
Working Days
F
10.00
10.00
6.00
26.00
Working hour
G
10.00
10
10
Number of workers
H
24
24
24
Total labor hours
I = h*g*f
2400
2400
1440
Total
Total Labor Cost
K
$158,400
$264,000
$79,200
$501,600
Total Material cost
L
$100,000
$240,000
$45,000
$385,000
Overhead expenses per month
M
$130,000
Total production Cost
N
$1,016,600
Revenue
O
$250,000
$900,000
$150,000
$1,300,000
Total production Cost = $1,016,600
Revenue = $1,300,000
Multifactor productivity = Revenue/total production cost = $1,300,000/$1,016,600 = $1.28
Multifactor productivity = $1.28
Percentage increase in productivity in July = (productivity in July – Productivity in June)/Productivity June
Percentage increase in productivity in July = (1.28 – 1.22)/1.22 x 100
Percentage increase in productivity in July = 4.91%
Product
T-shirts
Trousers
Shorts
Total
Labor rate per hour
a
$60
$100
$50
Direct Material Cost
b
$100
$200
$30
Annual overhead expense/day
c
$5,000
Units produced
d
600
1000
2000
Price per unit
e
$250
$750
$100
Working Days
f
9.00
10.00
7.00
26.00
Working hour
g
10.00
10
10
Number of workers
h
24
24
24
Total labor hours
i = h*g*f
2160
2400
1680
Total
Total Labor Cost
K = i*a
$129,600
$240,000
$84,000
$453,600
Total Material cost
l = d*b
$60,000
$200,000
$60,000
$320,000
Overhead expenses per month
m = c*5000
$130,000
Total Cost
N
$903,600
Revenue
O
$150,000
$750,000
$200,000
$1,100,000
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