The Moming Brew Coffee Shop sells Regular, Cappuccino, and Vienna blends of coff
ID: 422575 • Letter: T
Question
The Moming Brew Coffee Shop sells Regular, Cappuccino, and Vienna blends of coffee. The shop's current dally labor cost is $320, the equipment cost is $125, and the overhead cost is $226. Dally demands, along with price and materla costs per beverage, are given below Regular cappuccino coffee Vienna Beverages sold Price per beverage Material per bevera Coffee 300 $2.00 $0.50 200 53.00 $0.75 150 S4.00 S1.25 Harald Luckerbauer, the manager at Morning Brew Coffee Shop, would like to understand how adding Eiskaffee a German coffee beverage of chilled coffee, ilk, sweetener, and vanilla ice cream) will aller the shop's productivity. Her market rescarch shows that Eiskaffee will bring in new customers and not cannibalize current demand. Assuming that the new equipment is purchased before Eiskaffee is added to the menu, Harald has developed new average daily demand and cost projections. The new equipment cost is $200, and the overhead cost is S350. Modified daily demands, as well as price and material costs per beverage for the new product line, are given below Regular cappuccino coftee Vlenna EIskatfee Beverages sold Price per beverage Material per beverage ($) $0.50 0.75 $1.25 $2.00 Coffee 300 $2.00 200 $3.00 150 $4.00 50 $4.50 a. Calculate the change in labor and multifactor productivity if Eiskaffee is added to the menu. (Note: Be sure to round each individual labor and muitifactor productivity to no fewer than two decimal places before calculating the percentage changes.) The change in labor productivity iElska ee is added to the menu is Enter your response as a percent rounded to two decimal places and include a minus sign productivity decreases.Explanation / Answer
>Before Eiskaffee,
àLabor productivity = Revenues from coffees/Total labor cost
Revenue from coffees = 300*2+200*3+150*4 = $1800
Labor cost = $320
Labor productivity = 1800/320 = 5.625
àMultifactor productivity = Revenues from coffees/Total cost
Revenue = $1800
Total costs = Labor cost+ Equipment cost+ Overhead costs+ Material costs
= 320+125+225+(0.5*300+.75*200+1.25*150) = $1157.5
Multifactor productivity = 1800/1157.5 = 1.555
>After Eiskaffee,
à Revenues from coffees = 300*2+200*3+150*4+50*4.5 = $2025
Labor productivity = 2025/320 = 6.328
àTotal costs = 320+200+350+(.5*300+0.75*200+1.25*150+50*2) = 1457.5
Multifactor productivity = 2025/1457.5 = 1.389
>> The change in labor productivity = (6.328-5.625)*100/5.625 = 12.5%
>> The change in multifactor productivity = (1.389-1.555)*100/1.555 = -10.68%