Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 408458 • 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 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 $800 and a per loaf ingredient cost of S0.40. Current multifactor productivity for 640 work hours per month - loaves/dollar (round your response to three decimal places).Explanation / Answer
Multifactor productivity = output per unit of a combined sets of input.
output = 1500 loaves. inputs: (i) employee cost @$8 per hour and total of 640 hours = 640*8 = $5,120
(ii) utility cost = $800 (iii) ingredient cost @0.40 for 1500 loaves = 0.40*1500 = $600
Total input = 5120+800+600 = 6520
So, multifactor productivity = 1500 loaves/$6520 = 0.230 loaves per dollar.