QUESTION3 The output of a process is valued at $100 per unit. The cost of labour
ID: 399636 • Letter: Q
Question
QUESTION3 The output of a process is valued at $100 per unit. The cost of labour is $50 per hour including benefits department provided the following Labour $ Month 1 Month 2 The accounting Units Produced1,310 1,092 information about the process for the past Maral two months: 14,842 10,603 24,52320,442 10,4808,736 Overhead $ a. (a) Use the multifactor productivity ratio to ments had any effect and, if so, when the effect was see whether recent process improve noticeable (10%) b. (b) Has labour productivity changed? Use the labour productivity to support your answer. (6%)Explanation / Answer
a)
Multifactor productivity in month 1 = Value of Units produced / Total cost = 1310*100 / (14842+24523+10480) = 2.63
Multifactor productivity in month 2 = Value of Units produced / Total cost = 1092*100 / (10603+20442+8736) = 2.75
We see that multifactor productivity is higher in month 2. It shows that the recent process improvements had improved the productivity. The effect is visible in month 2 onwards.
b)
Labor productivity in month 1 = 1310*100/14842 = 8.83
Labor productivity in month 2 = 1092*100/10603 = 10.30
We see that the labor productivity is higher in month 2 as compared to month 1. Therefore, we can conlcude that labor productivity has increased as a result of recent process improvements.