Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 395424 • 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 increaseddemand.
The bakery currently makes 1,800 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 $600 and a per loaf ingredient cost of $0.50.
Current multifactor productivity for 640 work hours per month = 0.272 loaves/dollar (round your response to three decimal places).
After increasing the number of work hours to 992 per month, the multifactor productivity = _____loaves/dollar (round your response to three decimal places).
The percentage increase in productivity =____
Explanation / Answer
Production rate = 1,800 loaves per month
New Production rate (required to meet 55% increased demand)
= 1800*1.55
= 2790 loaves per month
Labour cost = $8 per hour
Utility cost = $600 per month
Ingredient cost = $0.50 per loaf
Multifactor productivity is Output produced per dollar input
New Multifactor productivity = Output / Input in dollars
= . Number of loaves produced .
[Total labour cost + utility cost + Total ingredient cost ]
= 2790 .
[ 992 * 8 + 600+ 2790* 0.50 ]
= 0.281
Current multifactor productivity = 0.272 loaves/dollar
Percentage increase in productivity = ( 0.281-0.272 ) * 100 = 3.286 %
0.272