The following table shows data on the average number of customers processed by s

Question

The following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $15, the overhead rate is 1.0 times labor cost, and material cost is $7 per customer.

Compute the labor productivity and the multifactor productivity for each unit. Use an eight-hour day for multifactor productivity. (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)

Suppose a new, more standardized procedure is to be introduced that will enable each employee to process one additional customer per day. Compute the expected labor and multifactor productivity rates for each unit. (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 4 decimal places.)

Unit Employees   Customers Processed / Day A 3 32 B 4 46 C 8 56 D 2 22

Explanation / Answer

Labor productivity = output per unit of labor = no. of customers processed per day/no. of employees. Multifactor productivity = output/labor+overhead+materials cost

Labor productivity (customers processed per employee) for unit A = 32/3 = 10.7

unit B = 46/4 = 11.5

unit C = 56/8 = 7.0

unit D = 22/2 = 11.0

Multifactor productivity = 8 hour day is being taken, so total hours = no. of employees*8. Total labor cost = total hours*$15 (the hourly wage rate). Overhead cost = 1*the total labor cost. materials cost = no. of customers processed*$7.

Using the above formulas the costs are:

Multifactor productivity for A = 32/944 = 0.034 customers per $ of input

B: 46/1282 = 0.036. C = 56/2312 = 0.024 and D = 22/634 = 0.035

Effect of new standardized procedure on labor productivity:

A = (32+1)/3 = 11.0 B = (46+1)/4 = 11.8 C = (56+1)/8 = 7.1 D = (22+1)/2 = 11.5

Multifactor productivity:

A = 33/951 = 0.0347 customers per $ of input

B = 47/1289 = 0.0365

C = 57/2319 = 0.0246

D = 23/641 = 0.0359

Unit Employees No. of customers Total hours (8*no. of employees) Labor cost ($15*total hours) Overhead rate Material cost ($7*no. of customers) Total costs (labor+overhead+material) A 3 32 24 360 360 224 944 B 4 46 32 480 480 322 1282 C 8 56 64 960 960 392 2312 D 2 22 16 240 240 154 634

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