Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 394947 • 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 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 1 comma 500 1,500 loaves per month. Employees are paid $ 8 8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $ 650 650 and a per loaf ingredient cost of $ 0.50 0.50. Current multifactor productivity for 640 work hours per month = nothing loaves/dollar (round your response to three decimal places).
Explanation / Answer
Current situation:
Output = 1500 loaves per month
Number of labor hours = 640 hours/month
Wages = $8 per labor hour
Utility cost per month = $650/month
Ingredient cost per loaf = $0.50
Multi-factor productivity = Output/input cost
Input cost = labor cost + utility cost + ingredient cost
Labor cost = Wages/hour x no. of labor hours = $8 x 640 hrs = $5,120/month
Ingredient cost = Ingredient cost per loaf x output = $0.50 x 1500 = $750/month
Input cost = $5,120 + $650 + $750 = $6,520
Multi-factor productivity = Output/input cost = 1500/$6,520
Multi-factor productivity = 0.2301 loaves/$
Current multifactor productivity for 640 work hours per month = 0.2301 loaves/dollar