Mike\'s guitar fabrication shop produces low cost, highly durable guitars for be
ID: 391842 • Letter: M
Question
Mike's guitar fabrication shop produces low cost, highly durable guitars for beginners. Typically, out of the 100 guitarsthat begin production each month, only 80 percent are considered good enough to sell. The other 20 percent are scrapped due to quality problems that are identified after they have completed the production process. Each guitar sells for $260. Because some of the production process is automated, each guitar only requires 12 labor hours. Labor is paid at $9 per hour, materials cost is $40 per guitar, andoverhead is $4,200. 019.The labor productivity for Mike's guitar fabrication shop is $ to 2 decimal places.) r hour. (Round your answer Q20.The multifactor productivity ratio for Mike's guitar fabrication shop is decimal places.) After some study, the operations manager Jim Brown recommends 3 options to improve the company's multifactor Round your answer to 2 Option 1: increase the sales price by 15 percent (while other things are held unchanged in the above description) Option 2: improve quality so that only 15 percent are defective instead of 20 percent (while other things are held unchanged in the above description) Option 3: reduce labor, materials, and overhead costs by 15 percent (while other things are held unchanged in the above description) Q21.If Mike's guitar fabrication shop decides to implement Jim Brown's option 1 to improve the multifactor productivity,the new ratio would be(Round your answer to 2 decimal places.) 022.If Mike's guitar fabrication shop decides to implement Jim Brown's option 2 to improve the multifactor productivity,the new ratio would be Round your answer to 2 decimal places.) 023.If Mike's guitar fabrication shop decides to implement Jim Brown's option 3 to improve the multifactor productivity,the new ratio would be(Round your answer to 2 decimal places.) Q24.The multifactor productivity from option 3 is option 2. (Round your answer to the nearest integer. Omit the % sign when entering the answer to Titanium) % higher than the multifactor productivity ratio fromExplanation / Answer
19
Labor productivity is calculated by
Output in $ / Input in labor hour
Here the output is 80% of 1 guitar every 12 hours. This means every 12 hours the output is 0.8 guitar. Each guitar sells at $260 thus 0.8 guitar will be 0.8*260 = 208. Thus the labor productivity is
208/12 = 17.33 per labor hour
Answer: $17.33 per labor hour
20
Multifactor productivity is calculated by
Output in $ / (labor cost $ + material cost $ + overhead $)
Here the overhead is high. The assumption is that this overhead is for 100 guitars. Thus the output is
100*260*0.8 = 20800
The total input is
100*12*9 + 40*100 + 4200 = 19000
Thus the multifactor productivity is 20800/19000 = 1.09
Answer: 1.09
21
In the new ratio, the sales price is increase by 15% thus the new output will be
20800*1.15 = 23920
The new multifactor productivity ratio will be 23920/19000 = 1.25
Answer: with option 1 the new multifactor productivity is 1.25
22
In the new ratio, the new sales price output will be
100*260*0.85 = 22100
The input remains unchanged and the new multifactor productivity is 22100/19000 = 1.16
Answer: with option 2 the new multifactor productivity is 1.16
23
In the new ratio we will reduce the total input cost by 15%. Thus the new input is
19000*0.85 = 16150
This will cause the new multifactor productivity to be 20800/16150 = 1.28
Answer: with option 3 the new multifactor productivity is 1.28
24
The difference in multifactor productivity of option 3 and 2 is 1.28 – 1.16 =0.12. The change is
(0.12/1.16)*100 = 10.34
Answer: the option 3 is 10.34% higher than the option 2