Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 399306 • Letter: C
Question
Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 45% 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 S8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $500 and a per loaf ingredient cost of $0.35 Current multifactor productivity for 640 work hours per month = loaves/dollar (round your response to three decimal places) After increasing the number of work hours to 928 per month, the multifactor productivity = | | loaves/dollar (round your response to three decimal places) The percentage increase in productivity % enter your response as a percentage rounded to two decimal placesExplanation / Answer
Multifactor productivity = Loaves per month/(Labor cost + Material cost + Utility cost)
Labor cost = Labor rate*Man hours
Material cost = Loaves per month*Loaf ingredient cost
Utility cost = 500
Current multifactor productivity = 1500/(8*640 + 1500*0.35 + 500) = 0.244
Increased loaf output is by 45%. So, new output = 1500*(1+45%) = 2175
Increased man hours multifactor productivity = 2175/(8*928 + 2175*0.35 + 500) = 0.250
% increase in productivity = (0.250 - 0.244)/0.244*100 = 2.46%