A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each. What increase in productivity is associated with the process improvement?

A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each. What increase in productivity is associated with the process improvement?

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Chapter1: Making Economics Decisions

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A company has introduced a process improvement that reduces processing time for each unit, so that
output is increased by 25% with less material, but one additional worker required. Under the old
process, five workers could produce 60 units per hour. Labor costs are $12/hour, and material input was
previously $16/unit. For the new process, material is now $10/unit. Overhead is charged at 1.6 times
direct labor cost. Finished units sell for $31 each. What increase in productivity is associated with the
process improvement?

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