Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 394814 • 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 thing to be changed.The bakery currently makes 1 comma 500 loaves per month. The pay will be $8 per hour for employees and each employee works 160 hours per month. Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $125 per month, but he will achieve the same new output (an increase to 2 comma 325.00) as the change in labor hours. a) Current productivity for 640 work hours = nothing loaves/dollar (round your response to three decimal places).
Explanation / Answer
Given values:
Current production = 1,500 loaves per month
Labor cost = $8 per hour
Working hours per worker = 160 hours per month
Increase in demand = 55%
Solution:
(a) Current productivity for 640 work hours is calculated as;
Current productivity = Total output / Total input in dollars
Current productivity = 1500 / (640 x $8)
Current productivity = 1500 / 5120
Current productivity = 0.293 loaves/dollar