Charles lackey operates a bakery in Idaho, Falls Because of its excellent produc
ID: 458939 • 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 1,600 loaves per month. Employees are paid $8 per hour. In addition to the labor cost, Charles has a constant utility cost per month of $650 and a per loaf ingredient cost of $0.50.
Current multifactor productivity for 640 work hours per month= ______loaves/dollar (round your response to three decimal places).
After increasing the number of work hours to 864 per month, the multifactor productivity = __loaves/dollar (round your response to three decimal places)
The percentage increase in productivity = __% (enter your response as a percentage rounded to two decimal places).
Explanation / Answer
Current labor cost = $8 * 640 = $ 5120
utility cost per month = $ 650
Ingredient cost 1600 loaves = $0.5 * 1600 = $ 800
Total Cost = $ 6570
Current multifactor productivity of 640 work hours per month = Loaves / Total cost = 0.244 loaves / dollar
We have to calculate the new total cost after 35% increase in production and work hours = 640*(1+35%) = 864 work hours
Current labor cost = $8 * 864 = $ 6912
utility cost per month = $ 650
Ingredient cost 1600 loaves = $0.5 * 2160 = $ 1080
Total Cost = $ 8642
After increasing the number of work hours to 864 per month, the multifactor productivity = 2160 / 8642 = 0.250 loaves/dollar
The percentage increase in productivity = (0.250-0.244)/0.244 = 2.46 %