George Kyparisis makes bearing balls in his Miami plant. With recent increases i
ID: 408690 • Letter: G
Question
George Kyparisis makes bearing balls in his Miami plant. With recent increases in his costs, he has a newfound interest in efficiency. George is interested in determining the productiity of his organization. He would like to know if his organization is maintaining the manufacturing average of a 3% increase in productivity. He has the following data representing a month from last year and an equivalent month this year:
The percent change in productivity for one month last year versus one month this year on a multifactor basis with dollars as the common denominator = ___%?
Last Year Now Cost Per Input Unit Units Produced 1000 1000 Labor Hours 300 275 $10 per hour Resin 48 43 $5 per pund Capital Invested 9,000 10,000 2% per month Energy 3,000 2,850 $0.50 per BTUExplanation / Answer
Last Year calculation :
Units produced = 1000
Cost of Labour per hour = 300 * $10 = $3000
Cost of Resin per pound = 48*$5 = $240
Cost of Energy per BTU = 3000 * $0.50 = $1500
Cost of capital invested per month = (9000 * 2 %) / 12 = $15
Multifactor productivity = Units produced / Labour + material + Energy + Capital
= 1000/ (3000+240+1500+15) = 0.210 = 21%
Calculation for current year :
Units produced = 1000
Cost of labour per hour = 275 * $10 = $2750
Cost of Resin per pound = 43 * $5 = $215
Cost of Energy per BTU = 2850 * $0.50 = $ 1425
Cost of Capital invested per month = (10000* 2 %) / 12 = $ 16.67
Multifactor productivity = 1000/ ( 2750 + 215 + 1425 + 16.67 ) = 0.2269 = 22.69 %
ANSWER :
percentage change in productivity for one month last year vs one month this year = 22.69/21= 1.08
i.e. there is 8 % increase in multifactor productivity.
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