Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 3297002 • Letter: C
Question
Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 55% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand.The bakery currently makes, 1600 loaves per month. Employees are paid $8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $850 and a per loaf ingredient cost of $0.50
Current multifactor productivity for 640 work hours per month = ? loaves/dollar (round your response to three decimal places).
Explanation / Answer
The bakery currently makes, 1600 loaves per month.
demand has increased by 55% in the last year
therefore
Multifactor productivity = Outputs/(Labor cost + Utility cost + Ingredients cost)
Output = 1600 loaves
Labor cost = 640 hours x $8= $5120
Utility cost = $850
Ingredients cost = 1600 x $0.50 =$800
Thus, multifactor productivity = 1600/ (5120+850+800) = 1600/6770= 0.2363
rounding off to three decimals 0.237