The Dulac Box plant produces wooden packing boxes to be used in the local seafoo

Question

The Dulac Box plant produces wooden packing boxes to be used in the local seafood industry. Current operations allow the company to make 500 boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some moderate changes in equipment, and conducted appropriate job training, so that production levels have risen to 300 boxes per shift. Labor costs average $10 per hour for each of the 5 full-time workers on each shift. Capital costs were previously $3,000 per day, and rose to $3,200 per day with the equipment modifications. Energy costs were unchanged by the modifications, at $400 per day. What is the firm's multifactor productivity before and after the changes?

Explanation / Answer

MFP before: 500 boxes / ($10x5x16 + $3000 + $400) = 500 / 4200 = 0.119 boxes/dollar

MFP after: 600 boxes / ($10x5x16 + $3200 + $400) = 600 / 4400 = 0.136 boxes/dollar

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