Lillian Fok is presidet of Lakefront Manufacturing a producer of bycycle tires.

Question

Lillian Fok is presidet of Lakefront Manufacturing a producer of bycycle tires. Fok makes 1,000 tires per day with the following resources:

a) What is the labor productivity per labor-hour for these tires at Lakefront Manufacturing?

b) What is the multifactor productivity for these tires at Lakefront Manufacturing?

c) What is the percent change in multifactor productivity if Fok can reduce the energy bill by $1,000 per dya without cutting productiong or changing any other inputs?

Please list the step by step process. Thank you

Labor: 400 hours per day @ $12.50 per hour Raw Material: 20,000 pounds per day @ $1 per pound Energy: $5,000 per day Capital costs: $10,000 per day

Explanation / Answer

Labor Productivity per Labor Hour = No of Units Produced / Total Labor Hours = 1000 tires / 400 labor hours = 2.5 tires per labor hour Multifactor Productivity Cost Calculation Labor Cost $5,000.00 (400 hours * $12.50 per hour) Raw Material Cost $20,000.00 (20000 pounds * $1 per pound) Energy Cost $5,000.00 Capital Cost $10,000.00 Total Multifactor Cost $40,000.00 Multifactor Productivity = No of Units/Total Factor Cost = 1000 tires / $40000 = 0.025 tires per dollar Multifactor Productivity Cost Calculation (When Energy Cost reduces by $1000) Labor Cost $5,000.00 (400 hours * $12.50 per hour) Raw Material Cost $20,000.00 (20000 pounds * $1 per pound) Energy Cost $4,000.00 Capital Cost $10,000.00 Total Multifactor Cost $39,000.00 Multifactor Productivity = No of Units/Total Factor Cost = 1000 tires / $39000 = 0.02564 tires per dollar Change in Multifactor Productivity = 0.02564 - 0.025 = 0.00064 % Change = 0.00064 / 0.025 = 2.564%

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