Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent

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 increased demand. The bakery currently makes 1,500 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 $700 and a per loaf ingredient cost of S0.35. Current multifactor productivity or 640 work hours per month = »loaves dollar roundyour response three dec ma place

Explanation / Answer

Current production = 1500

Labour cost = 8

Utility cost = 700

Manufacturing cost = 0.35

Therefore, productivity = 700 + (8×640) + (0.35×1500)

= 6345.

So, production of loaves per dollar = 1500/6345

= 0.236.

Therefore, 0.236 loaves per dollar is the current productivity.

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