Problem 1: Productivity and Productivity Growth (10 points) McDonald’s hires 3 c
ID: 442716 • Letter: P
Question
Problem 1: Productivity and Productivity Growth (10 points)
McDonald’s hires 3 cashiers, each working an 8 hour shift, 5 days per week. Each cashier makes $10 per hour. The 3 cashiers working together take a combined 456 orders per 8 hour shift.
A)What is the labor productivity (in orders per labor hour) for McDonald’s? (2 points)
B) What is the capital productivity (in orders per labor dollar) for McDonald’s? (2 points)
For parts c and d, McDonald’s is considering sending the 3 new cashiers to a training class. If all 3 cashiers complete the training class, they will be able to take a combined 552 orders per 8 hour shift.
C) What would be the new labor productivity (in orders per labor hour) for McDonald’s? (3 points)
D) What would be the labor productivity growth if the cashiers attend the training class? (3 points)
Problem 2: Breakeven, Total Cost and Expected Value (9 points)
Your company plans to release its first new product on November 1 this year. The manufacturing will be outsourced, but your company will be required to provide the molds for the product at a fixed cost of $150,000 before manufacturing can begin. The molds are expected to last one month before they wear out and new molds need to be purchased. The manufacturer will charge $100/unit made which you will sell to your customers for $350 each. Marketing has provided the following demand forecast for November.
Demand Level
Nov Units Sold
Probability
Low Demand
300
10%
Medium Demand
550
60%
High Demand
1,250
30%
A) How many units does your company need to sell in November to break even? (3 points)
B) What is the total cost (fixed plus variable) in November if the product has low demand? (3 points)
C) What is the expected value of the total cost in November? (3points)
Problem 3: Theory of Constraints (6 points)
The manufacturing company you work for has a four step assembly process shown in the flow diagram below.
Process 1
Capacity =
73 units/hr
Process 2
Capacity =
67 units/hr
Process 3
Capacity =
91 units/hr
Process 4
Capacity =
79 units/hr
A) What is the maximum output this assembly process could produce in 8 hours? (2 points)
B) If the capacity of Process 1 is increased to 91 units/hour, how many units can be assembled in 8 hours? (2 points)
C) Assume the capacity Process 1 is not changed in the diagram above, but instead the capacity of Process 2 is increased to 91 units/hour. How many units can be assembled in 8 hours? (2 points)
Demand Level
Nov Units Sold
Probability
Low Demand
300
10%
Medium Demand
550
60%
High Demand
1,250
30%
Explanation / Answer
Problem 1.
A.
Total No. of orders ( in 8 hrs) = 456
Total no. of Labor hours ( in 8 hrs) = No. of cashiers * 8 = 3*8 = 24
Labor productivity (orders per labor hour) = Total No. of orders / total no. of Labor hours
Labor productivity (orders per labor hour) =456 / 24
Labor productivity (orders per labor hour) = 19
B.
Total No. of orders ( in 8 hrs) = 456
Capital used (in 8 hrs) = No. of labor dollar = No. of cashiers*Dollar payment per hr*8
No. of labor dollar = 3*10*8 =240
Capital productivity (orders per labor dollars) = Total No. of orders / total no. of Labor dollars
Capital productivity (orders per labor dollars) =456 / 240 = 1.9
C.
New Total No. of orders (in 8 hrs) = 552
New Labor productivity (orders per labor hour) =552 / 24 =23
D.
Labor Productivity Growth=(New Labor Productivity – Old Labor productivity)/Old Labor productivity
Labor Productivity Growth = (552 – 456)/456 = 21.05%