Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent
ID: 415362 • 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 manyoccasions, 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 thing to be changed.The bakery currently makes
1,500
loaves per month. The pay will be
$8
per hour for employees and each employee works 160 hours per month.
Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of
$150
per month, but he will achieve the same new output (an increase to
2,175.00)
as the change in labor hours.
a) Current productivity for 640 work hours =
nothing
loaves/dollar (round your response to three decimal places).
If Charles chooses to increase the number of work hours to
928
in order to employ the new oven loading technique, then the productivity is =
nothing
loaves/dollar (round your response to three decimal places).
b) If Charles instead chooses to purchase a new blender (while holding labor constant at 640 hours at
$8
per
hour),
then the productivity is =
nothing
loaves/dollar (round your response to three decimal places).
c) By adding manpower, the percentage increase in productivity is
nothing%
(enter your response as a percentage rounded to two decimal places and include a minus sign if necessary).
By purchasing a new blender (while holding labor constant at 640 hours at
$8
per
hour),
the percentage increase in productivity is
nothing%
(enter your response as a percentage rounded to two decimal places and include a minus sign if necessary).
Explanation / Answer
(a)
Current Output = 1500 loaves
Current input labor-hours = 640 x $8 = $5,120
So, current productivity = 1500 / 5120 = 0.2930 loaves/ dollar
-----
New output = 1500 x 1.45 = 2175
New labor hour input cost = 928 x $8 = $7,424
So, productivity = 2175 / 7424 = 0.2930 loaves/ dollar
(b)
New output = 1500 x 1.45 = 2175
Existing input labor-hours = 640 x $8 = $5,120
Cost of blending = $150
So, productivity = 2175 / (5120+150) = 0.4127 loaves/ dollar
(c)
By adding manpower, the % increase in productivity = 0%
By adding blender the % increase in productivity = (0.4127 - 0.2930) / 0.2930 = 40.85%