The Cool-Tech Company produces various types of fans. In May, the company produc

Question

The Cool-Tech Company produces various types of fans. In May, the company produced 1,728 window fans at a retail price of $40 00 The company has 12 direct labor employees. During May, window fans were produced on 9 working days (of 8 hours each), and other produced on other days. Determine the Labor productivity of the window fans. The Cool-Tech Company also produces desk fans at a retail price of $25 00 During May, 1,872 desk fans were produced on 11 working days (of 8 hours each) by 12 direct labor employees. But on one day, two employees called in sick. Determine the labor productivity of the desk fans ($ per labor hour) Here is additional information about the Cool-Tech Company (see (a) & (b)). There were 20 working days in May, during which the compensate for a Cool-Tech direct labor employee (including wages and fringe benefits) amounted to $25,00 per hour. The direct material cost of window fans is $10.00 per unit; the direct material cost of desk fans is $5.00 per unit The overhead expense incurred in operating the factory is $1,000 per working day. Determine the multi-factor productivity of the Cool-Tech Company in May.

Explanation / Answer

a.

Correct Answer:

(B) $80 / hr

Working Note:

Labor hrs. = No. of labors* days of work * hours worked in a day = 12*9*8 = 864

Productivity = No. of fans * price = 1728*40 = 69120

Labor productivity for window fans = productivity / No. of labor hrs. = 69120 / 864

Labor productivity for window fans = $80 / labor hr

b.

Correct Answer:

(B) $45 / hr

Working note:

Productivity = No. of fans * price = 1872*25 = $46800

Net Labor hrs. = No. of labors* days of work * hours worked in a day – Absent labor hrs.

Net Labor hrs. =12*11*8 – 2*1*8 = 1040

Labor productivity for window fans = productivity / No. of labor hrs. = 46800/1040

Labor productivity for window fans =$45 / labor hr

c.

Correct Answer:

(c) 1.23

Working note:

Multifactor productivity = Total productivity in dollars / (cost of labor hrs. for window fan + cost of labor hrs. for desk fan + direct material cost for window and labor fan + total overhead expenses for the month)

Multifactor productivity = (69120+46800)/( (25*864+25*12*11*8 – 2*1*8)

+ (1728*10 + 1872*5) + 20*1000)

Multifactor productivity = 1.225 = 1.23 approx.

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