Charles lackey operates a bakery in Idaho, Falls Because of its excellent produc
ID: 458802 • Letter: C
Question
Charles lackey operates a bakery in Idaho, Falls Because of its excellent product location, demand has increased by 35% 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 backed 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 1,800 loaves per month. Employees are paid $8.00 per hour. In addition to the labor cost, Charles has a constant utility cost per month of $700 and a per loaf ingredient cost of $0.50. current multifactor productivity for 640 work hours per month=
Explanation / Answer
Multifactor productivity = Output / (K+L+E+M+S)
Output = 1, 800 loafs per month * SP
L (dollar quantity of labor) = 8*640 = $5,120 per month
K (dollar quantity of capital) = NA
M (dollar quantity of materials) = .50 * 1800= $900 per month
S (dollar quantity of [business] services) = $700 per month
E (energy (only used in some models) = NA
Multifactor productivity = 1800 / (5120+900+700) = 1800 / 6720 = .267
The Multifactor productivity will be .267 multipled by the estimated selling price.