David Upton is president of Upton Manufacturing, a producer of Go-Kart tires. Up

Question

David Upton is president of Upton Manufacturing, a producer of Go-Kart tires. Upton makes 1,000 tires per day with the following resources: Labor: 400 hours per day @ $12.50 per hour Raw material: 20,000 pounds per day @ $1 per pound Energy: $5,000 per day Capital costs: $10,000 per day a) What is the labor productivity per labor-hour for these tires at Upton Manufacturing? b) What is the multifactor productivity for these tires at Upton Manufacturing? c) What is the percent change in multifactor productivity if Upton can reduce the energy bill by $1,000 per day without cutting production or changing any other inputs?

Explanation / Answer

a)

Labor Productivity = 1000/400

LP = 2.5 tires per Labor hour

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b)

Multifactor Productivity = 1000 /( 5000+20,000+5000+10,000)

MP = 0.025

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c)

MP= 1000/( 5000+20,000+4000+10,000)

MP= 0.0256

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