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ABC made upgrades to the production process and achieved a 25% increase in production with less raw material. At the same time, however, an additional employee had to be hired. Under the old process, 5 employees could produce 60 pieces per hour at a cost of $16/piece of raw material. With the new process, the cost of the raw material has been reduced to $10 per piece. The direct labor cost is $12/hour per person and overhead is calculated at 1.6 times the direct labor cost. The finished products are sold at a price of $31

ABC made upgrades to the production process and achieved a 25% increase in production with less raw material. At the same time, however, an additional employee had to be hired. Under the old process, 5 employees could produce 60 pieces per hour at a cost of $16/piece of raw material. With the new process, the cost of the raw material has been reduced to $10 per piece. The direct labor cost is $12/hour per person and overhead is calculated at 1.6 times the direct labor cost. The finished products are sold at a price of $31

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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ABC made upgrades to the production process and achieved a 25% increase in production with less raw material. At the same time, however, an additional employee had to be hired. Under the old process, 5 employees could produce 60 pieces per hour at a cost of $16/piece of raw material. With the new process, the cost of the raw material has been reduced to $10 per piece. The direct labor cost is $12/hour per person and overhead is calculated at 1.6 times the direct labor cost. The finished products are sold at a price of $31 each. Calculate the increase in productivity that has occurred by improving the production process.
Transcribed Image Text:ABC made upgrades to the production process and achieved a 25% increase in production with less raw material. At the same time, however, an additional employee had to be hired. Under the old process, 5 employees could produce 60 pieces per hour at a cost of $16/piece of raw material. With the new process, the cost of the raw material has been reduced to $10 per piece. The direct labor cost is $12/hour per person and overhead is calculated at 1.6 times the direct labor cost. The finished products are sold at a price of $31 each. Calculate the increase in productivity that has occurred by improving the production process.
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