Problem 8: A company recently bought new equipment that reduces the labor conten
ID: 347472 • Letter: P
Question
Problem 8: A company recently bought new equipment that reduces the labor content to manufacture shopping cart. Prior to buying this new equipment the company used 5 workers who produced an average of 80 carts per hour. In the old system, workers received $10 per hour and machine cost was $40 per hour. With the new equipment, it was possible to transfer a worker to another department, and equipment cost increased by $10 per hour while output increased by four carts per hour. 1. Compute labor productivity under each system. Use carts per worker hour as measure of labor productivity Compute multifactor productivity. (Labor +Equipment) 2.Explanation / Answer
8.
A.
In the old system,
Output per hour = 80 carts
No. of worker hour per hour = 5*1 = 5
Labor productivity (old system) = output/no. of worker hour = 80/5
Labor productivity (old system) = 16 carts per worker hour
There are only 4 workers per hour in the new system.
Labor productivity (new system) = output/no. of worker hour = 84/4
Labor productivity (new system) = 21 carts per worker hour
B.
Multifactor productivity = output/(labor cost + machine cost)
Multifactor productivity (old system) = 80/(10*5 + 40) = .89 carts per dollar
Multifactor productivity (new system) = 84/(10*4 + 50) = .93 carts per dollar