Productivity and Quality: Prospective Analysis Analytic Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections. Current System Computerized System Output (units) 30,000 30,000 Output selling price $40 $40 Input quantities: Materials 120,000 105,000 Labor 60,000 45,000 Capital (dollars) $60,000 $300,000 Energy 30,000 75,000 Input prices: Materials $4.00 $5.00 Labor $9.00 $10.00 Capital (percent) 10.00% 10.00% Energy $2.00 $3.00 Required: 1. Compute the partial operational ratios for materials and labor under each alternative. If required, round your answers to two decimal places. Current system Computerized system Materials Labor Is the production manager right in thinking that materials and labor productivity increase with the automated system?Yes 2. Compute the productivity profiles for each system. If required, round your answers to two decimal places. Current System Computerized System Materials Labor Capital Energy Does the computerized system improve productivity?Results are mixed - trade-offs must be valued 3. Determine the amount by which profits will change if the computerized system is adopted.
Productivity and Quality: Prospective Analysis
Analytic Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections.
| Current System | Computerized System | |
| Output (units) | 30,000 | 30,000 |
| Output selling price | $40 | $40 |
| Input quantities: | ||
| Materials | 120,000 | 105,000 |
| Labor | 60,000 | 45,000 |
| Capital (dollars) | $60,000 | $300,000 |
| Energy | 30,000 | 75,000 |
| Input prices: | ||
| Materials | $4.00 | $5.00 |
| Labor | $9.00 | $10.00 |
| Capital (percent) | 10.00% | 10.00% |
| Energy | $2.00 | $3.00 |
Required:
1. Compute the partial operational ratios for materials and labor under each alternative. If required, round your answers to two decimal places.
| Current system | Computerized system | |
| Materials | ||
| Labor |
Is the production manager right in thinking that materials and labor productivity increase with the automated system?
Yes
2. Compute the productivity profiles for each system. If required, round your answers to two decimal places.
| Current System | Computerized System | |
| Materials | ||
| Labor | ||
| Capital | ||
| Energy |
Does the computerized system improve productivity?
Results are mixed - trade-offs must be valued
3. Determine the amount by which profits will change if the computerized system is adopted.
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