A company that makes shopping carts for supermarkets and other stores recently p
ID: 422008 • Letter: A
Question
A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers who together produced an average of 80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $10 per hour while output increased by four carts per hour a. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity Before After carts per worker per hour carts per worker per hour b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 3 decimal places.) Before After carts/dollar cost carts/dollar cost c. Comment on the changes in productivity according to the two measures. (Round your intermediate calculations to 3 decimal places and final answers to 2 decimal places. Omit the "%" signs in your response.) Labor productivity Multifactor productivity (Click to select) by Click to select) increased decreasedExplanation / Answer
Current:
Output = 80 carts per hour
No of labor = 5
Wage per hour = 10
Machine per hour = 40
New system:
Output = 84 carts per hour
No of labor = 4
Wage per hour = 10
Machine per hour= 50
a)
Labor productivity = Output /No of labor
Current Labor productivity = 80/5 = 16 carts per worker per hour
New Labor productivity = 84/4 = 21 carts per worker per hour
% change = (21-16)/16 = 0.3125 or 31.25%
b)
Multifactor productivity (MFP) = Output/Input
Input = Labor cost + Machine cost
Current Multifactor productivity = 80/(5*10 + 40) =80/90= 0.8889 carts per dollar cost
New Multifactor productivity = 84/(4*10 +50) = 84/90 = 0.9333 carts per dollar cost
% change = 4.99%
c) Labor productivity % change = 31.25%
New Multifactor productivity % change = 4.99%
New system is best
Current:
Output = 80 carts per hour
No of labor = 5
Wage per hour = 10
Machine per hour = 40
New system:
Output = 84 carts per hour
No of labor = 4
Wage per hour = 10
Machine per hour= 50
a)
Labor productivity = Output /No of labor
Current Labor productivity = 80/5 = 16 carts per worker per hour
New Labor productivity = 84/4 = 21 carts per worker per hour
% change = (21-16)/16 = 0.3125 or 31.25%
b)
Multifactor productivity (MFP) = Output/Input
Input = Labor cost + Machine cost
Current Multifactor productivity = 80/(5*10 + 40) =80/90= 0.8889 carts per dollar cost
New Multifactor productivity = 84/(4*10 +50) = 84/90 = 0.9333 carts per dollar cost
% change = 4.99%
c) Labor productivity increased by31.25 %
New Multifactor productivity increased by 4.99% change = 4.99%
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