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QUESTION 1 (PRODUCTIVITY) 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 $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. a) Compute single factor productivity of labor in the old system. (Compute it in four possible ways.) b) Compute all factor productivity for both old and new systems. Factor Output # of workers Worker cost Material Overhead Price Old System 60 5 $12/hr $16/unit 1.6(labor cost) 31 New System 60(1.25)=75 6 $12/hr $10/unit 1.6(labor cost) 31

QUESTION 1 (PRODUCTIVITY) 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 $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. a) Compute single factor productivity of labor in the old system. (Compute it in four possible ways.) b) Compute all factor productivity for both old and new systems. Factor Output # of workers Worker cost Material Overhead Price Old System 60 5 $12/hr $16/unit 1.6(labor cost) 31 New System 60(1.25)=75 6 $12/hr $10/unit 1.6(labor cost) 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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QUESTION 1 (PRODUCTIVITY) 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 $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. a) Compute single factor productivity of labor in the old system. (Compute it in four possible ways.) b) Compute all factor productivity for both old and new systems. Factor Output # of workers Worker cost Material Overhead Price Old System 60 5 $12/hr $16/unit 1.6(labor cost) 31 New System 60(1.25) = 75 6 $12/hr $10/unit 1.6(labor cost) 31
Transcribed Image Text:QUESTION 1 (PRODUCTIVITY) 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 $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. a) Compute single factor productivity of labor in the old system. (Compute it in four possible ways.) b) Compute all factor productivity for both old and new systems. Factor Output # of workers Worker cost Material Overhead Price Old System 60 5 $12/hr $16/unit 1.6(labor cost) 31 New System 60(1.25) = 75 6 $12/hr $10/unit 1.6(labor cost) 31
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