Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 412764 • Letter: C
Question
Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 25% 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, Charies also has a constant utility cost per month of $700 and a per loaf ingredient cost of $0.40. Current muitfactor productivity for 640 work hours per month 0.234 loaves/dollar (round your response to three decimal places). After increasing the number of work hours to 800 per month, the multifactor productivity (round your response to three decimal places). per month, the multifactor productivity-Lloaves/dollarExplanation / Answer
Employee cost for 640 work hours per month = $8 / hour x 640 work hours = $5120
Utility cost per month = $700
Ingredient cost per month = $0.40 / loaf x 1500 loaves = $600 loaves
Thus, total cost = Employee cost + Utility cost + Ingredient cost = $5120 + $700 + $600 = $6420
Current production per month = 1500 loaves
Therefore, Multifactor productivity = Total number of loaves per month / Total cost per month = 1500/6420 = 0.234 ( rounded to 3 decimal places )
CURRENT MULTIFACTOR PRODUCTIVITY FOR 640 LOVAES PER MONTH = 0.234 loaves/ Dollar
Revised scenario of 800 work hours per month :
Employee cost for 800 work hours per month = $8 / hour x 800 work hours = $6400
Utility cost per month = $700
Ingredient cost per month = $0.40 / loaf x 1500 loaves = $600 loaves
Thus, total cost = Employee cost + Utility cost + Ingredient cost = $6400 + $700 + $600 = $7700
Current production per month = 1500 loaves
Therefore, Multifactor productivity = Total number of loaves per month / Total cost per month = 1500/7700 = 0.195 ( rounded to 3 decimal places )
MULTIFACTOR PRODUCTIVITY AFTER INCREASING THE WORK HOURS 800 PER MONTH = 0.195 loaves/ Dollar
CURRENT MULTIFACTOR PRODUCTIVITY FOR 640 LOVAES PER MONTH = 0.234 loaves/ Dollar