Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences)
Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences)
12th Edition
ISBN: 9781259580093
Author: William J Stevenson
Publisher: McGraw-Hill Education
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Chapter 2, Problem 7P

a)

Summary Introduction

To compute: The labor productivity and multifactor productivity for each unit.

Introduction: Labor productivity is the measure of productivity of a worker during a period of time. It the ratio of total output to the total productivity hours.

a)

Expert Solution
Check Mark

Answer to Problem 7P

Multifactor productivity has dropped from 0.020 to 0.015.

Explanation of Solution

Given information:

Unit Employees Customer processed/day
A 4 36
B 5 40
C 8 60
D 3 20

Hourlywage=$25Overhead=1.0×LaborcostMaterialcost=$5percustomer

Formula:

MultifactorProductivity=OutputTotalcostLaborProductivity=CustomersperdayEmployeesTotalcost=Laborcost+Overheadcost+Materialcost

Laborcost=Numberofworkers×8hours×$25/hourOverheadcost=Laborcost×1.00Materialcost=Customers×$5/customer

Calculation of multifactor productivity:

Unit Employees Customer processed/day Labor cost Overhead cost Material cost Total cost Labor productivity MFP (2decimal) MFP (3decimal)
A 4 36 800 800 180 1780 9 0.02 0.020
B 5 40 1000 1000 200 2200 8 0.02 0.018
C 8 60 1600 1600 300 3500 7.5 0.02 0.017
D 3 20 600 600 100 1300 6.6666667 0.02 0.015

Table 1

Excel Worksheet:

Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences), Chapter 2, Problem 7P , additional homework tip  1

Calculation of multifactor productivity:

Unit A:

Labor cost is calculated by multiplying number of workers (4) with 8working hours and 25 hourly wages which gives 800.

Overhead cost is calculated by multiplying Labor cost of 800 with 1.0 which gives 800.

Material cost is calculated by multiplying 36 with 5 which gives 180.

Total cost is calculated by adding labor cost of 800, overhead cost of 800 and material cost of 180 which yields 1780.

Labor productivity is calculated by dividing 36 with 4 which yields 9.

Multifactor productivity is calculated by dividing 36 with the total cost of 1,780 which yields 0.02 (2-decimal) and 0.020 (3 decimal).

Same procedure is followed for unit B, C and D the result is shown in table 1.

Hence, multifactor productivity has dropped from 0.020 to 0.015.

b)

Summary Introduction

To compute: The labor productivity and multifactor productivity for each unit.

Introduction: Multifactor productivity is also referred as total factor productivity. It is the measure of economic performance by comparing the amount of goods and services produced to the total input used to produce the output.

b)

Expert Solution
Check Mark

Answer to Problem 7P

Multifactor productivity has dropped from 0.022to 0.017.

Explanation of Solution

Given information:

Every employee process on additional customers.

Unit Employees Customer processed/day
A 4 40
B 5 45
C 8 68
D 3 23

Hourlywage=$25Overhead=1.0×LaborcostMaterialcost=$5percustomer

Formula:

MultifactorProductivity=OutputTotalcostLaborProductivity=CustomersperdayEmployeesTotalcost=Laborcost+Overheadcost+Materialcost

Laborcost=Numberofworkers×8hours×$25/hourOverheadcost=Laborcost×1.00Materialcost=Customers×$5/customer

Calculation of multifactor productivity:

Unit Employees Customer processed/day Labor cost Overhead cost Material cost Total cost Labor productivity MFP (2decimal) MFP (3decimal)
A 4 40 800 800 200 1800 10 0.02 0.022
B 5 45 1000 1000 225 2225 9 0.02 0.020
C 8 68 1600 1600 340 3540 8.5 0.02 0.019
D 3 23 600 600 115 1315 7.6666667 0.02 0.017

Table 2

Excel Worksheet:

Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences), Chapter 2, Problem 7P , additional homework tip  2

Calculation of multifactor productivity:

Unit A:

Labor cost is calculated by multiplying number of workers (4) with 8 working hours and 25 hourly wages which gives 800.

Overhead cost is calculated by multiplying Labor cost of 800 with 1.0 which gives 800.

Material cost is calculated by multiplying 40 with 5 which gives 200.

Total cost is calculated by adding labor cost of 800, overhead cost of 800 and material cost of 200 which yields 1800.

Labor productivity is calculated by dividing 40 with 4 which yields 10.

Multifactor productivity is calculated by dividing 40 with the total cost of 1,800 which yields 0.02 (2-decimal) and 0.022 (3 decimal).

Same procedure is followed for unit B, C and D the result is shown in table 2.

Hence, multifactor productivity has dropped from 0.022to 0.017.

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