1.13. Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its exc
ID: 404577 • Letter: 1
Question
1.13. Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 25% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. As a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery makes 1,500 loaves per month with a labor productivity of 2.344 loaves per labor-hour, how many workers will lackey need to add? (hint: each worker works 160 hours per month).
1.14. Refer to problem 1.13. The pay will be $8 per hour for employees. Charles lackey can also improve the yeild by purchasing a new blender. The new blender will mean a new increase in his investement. This added investment has a cost of $100 per month, but he achieve the same output (an increase to 1,875) as the change in labor hrs. Which is the better decision? a) Show the productivity change, in loaves per dollar, with an increase in labor cost (fro 640-800 hours). b) Show the new productivity, in loaves per dollar, with only an increase in investment ($100 per month more) c) Show the new productivity change for labor and investment.
1.15. Refer to problem 1.13 and 1.14. If charles lackey's utility costs remain constant at $500 per month, labor at $8 per hour, and cost of ingredients at $0.35 per loaf, bur charles does not purchase the blender suggested in problem 1.14, what will the productivity of the bakery be? what will the percent increase or decrease be?
Explanation / Answer
11.3
Productivity is given as:
P = Output/Input
Current Situation:
Each employee work for 160 hours per month
Labor productivity = 2.344 loaves per hour
Each worker works 160 hours per month
Labor hours required to produce 1500 loaves per month = Number of workers x 160 hours per month
Let, N = number of workers required
Labor hours required = (N x 160) hours/month
Productivity = Output/Input
Output = 1500 loaves per month
Input = 160N labor hours per month
Productivity = 2.344
2.344 = 1500/160N
N = 4
To satisfy current demand bakery requires 4 workers
Demand Increased situation:
The demand is increase 25%,
New demand = 1.25 x 1500 = 1875 loaves per month
Productivity = Output/Input
Output = 1875 loaves per month
Input = 160N labor hours per month
Productivity = 2.344
2.344 = 1875/160N
N = 5 workers
Number of workers required to match the required demand = 5
Additional workers required for manual loading = 5 – 4 = 1 worker
ANS: 1 worker
1.14
a. Current situation:
Output = 1500 loaves per month
Wages = $8 per labor hour
Number of labor hours = 4 worker x 160 hours/month = 640 hours/month
Current Productivity is obtained as follows:
Pc = (1500 loaves)/($8 x 640 hrs) = 0.2929 loaves/dollar
Option A – Implementing new oven loading technique:
(It requires additional labor hours)
Demand increased by 25%
Current production = 1,500 loaves per month
Output = 1500 + (1500 x 0.25) = 1875 loaves per month
Number of labor hours required = 5 labor x 160 = 800 labor hours per month
Input cost ($) = 800 hours x $8 per hour
Productivity of option A:
PA = 1875/($8 x 800) = 0.2929 loaves/dollar
The current productivity and productivity of new loading technique is same, thus there is no change in the productivity per dollar by increasing labor hours from 640 to 800 hours (from 4 to 5 workers)
b.
Option B – Purchase new blender:
(It requires additional investment of $100)
Output = 1500 x 1.25 = 1875 loaves per month
Number of labor hours = 640 hours per month
Additional Investment Cost = $100
Input cost = $100 + ($8 x 640) = $5220
Productivity of option B:
PB = 1875/$5220 = 0.3592 loaves per dollar
c.
Productivity increase due to Option A:
% increase in PA = (PA – PC)/PC = (0.2929 – 0.2929)/0.2929 x 100 = 0%
Productivity increase due to Option B:
% increase in PB = (PB – PC)/PC = (0.3592 – 0.2929)/0.2929 x 100 = 22.63%
Thus, the option B is better than option A, install new blender to increase the productivity.
11.5
Current Situation:
Productivity with demand of 1500 loaves/month
Labor cost = 4 labors x $8/hour x 160 hours/month = $5120
Raw materials cost = $0.35/loaf x demand = $0.35 x 1500 = $525 per month
Utility cost = $500 per month
Total input cost = labor cost + raw materials cost + utility cost
Total input cost ($) = $5120 + $525 + $500 = $6145
P1 = Productivity (loaves per dollar) = 1500/$6145 x 100 = 24.41 loaves/dollar
New loading technique:
Productivity with demand of 1875 loaves/month (requires 5 workers for loading technique)
Labor cost = 5 labors x $8/hour x 160 hours/month = $6400
Raw materials cost = $0.35/loaf x demand = $0.35 x 1875 = $656.25 per month
Utility cost = $500 per month
Total input cost = labor cost + raw materials cost + utility cost
Total input cost ($) = $6400 + $656.25 + $500 = $7556.25
P2 = Productivity (loaves per dollar) = 1875/$7556.25 x 100 = 24.814 loaves/dollar
Productivity change = (P2 – P1)/P1 x 100 = (24.814 – 24.41)/24.41 x 100 = 1.65%
Productivity is increased by 1.65%
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