Mariah Enterprises makes a variety of consumer electronic products. Its camera m
ID: 416462 • Letter: M
Question
Mariah Enterprises makes a variety of consumer electronic products. Its camera manufacturing plant is considering choosing between two different processes, named Alpha and Beta, which can be used to make a component part. To make the correct decision, the managers would like to compare the labor and multifactor productivity of process Alpha with that of process Beta. The value of process output for Alpha and Beta is
$200
per unit of product A and
$130
per unit of product B, and the corresponding overhead costs for Alpha and Beta are
$8000
and
$4000
respectively.
Process Alpha
Process Beta
Product
A
B
A
B
Output (units)
70
40
60
30
Labor ($)
1200
1400
1000
2000
Materials ($)
$3500
2500
$1400
a. Which process, Alpha or Beta, is more productive?
Process
blank
has
blank
higher labor productivity. Process
blank
has
blank
higher multifactor productivity. (Enter your responses rounded to the nearest whole number.)
Process Alpha
Process Beta
Product
A
B
A
B
Output (units)
70
40
60
30
Labor ($)
1200
1400
1000
2000
Materials ($)
$3500
15002500
$1400
Explanation / Answer
Process Alpha :
Total value of process output
= $200/ unit of A x 70 units of A + $ 130 / unit of B x 40 units of B
= $14000 + $5200
= $19200
Total Labor cost
= Labor cost for A + Labor cost for B
= 1200 + 1400
= $2600
Thus,
Labor productivity= Total value of process output / Total labor cost = 19200 / 2600 = 7.384
Total material cost
= Material cost for A + Material cost for B
= $3500 + $1500
= $5000
Overhead cost = $8000
Thus, total cost = Labor cost + Material cost + Overhead cost = $2600 + $5000 + $8000 = $15600
Multifactor productivity = Total value of process / Total cost = 19200 /15600 = 1.23 ( 1 rounded to nearest whole number )
Process Beta:
Total value of process output
= $200/ unit of A x 60 units of A + $ 130 / unit of B x 30 units of B
= $12000+ $3900
= $15900
Total Labor cost
= Labor cost for A + Labor cost for B
= 1000 + 2000
= $3000
Thus,
Labor productivity Total value of process output / Total labor cost = 15900 /3000 = 5.3
Total material cost
= Material cost for A + Material cost for B
= $2500 + $1400
= $3900
Overhead cost = $4000
Thus, total cost = Labor cost + Material cost + Overhead cost = $3000 + $3900 + $4000 = $10900
Multifactor productivity = Total value of process / Total cost = 15900 / 10900 = 1.458 ( 1 rounded to nearest whole number)
Labor productivity of Alpha ( 7.384 ) > Labor productivity Beta ( 5,3)
Multifactor productivity of Beta ( 1.458 ) > Multifactor productivity of alpha ( 1.23 )
ALPHA HAS HIGHER LABOR PRODUCTIVITY
BETA HAS HIGHER MULTIFACTOR PRODUCTIVITY
ALPHA HAS HIGHER LABOR PRODUCTIVITY
BETA HAS HIGHER MULTIFACTOR PRODUCTIVITY