Question

A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers, who produced an average of 77 carts per hour. Workers receive $11/hour and machine cost was $47 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $14 per hour while output increased by four carts per hour.
a. Compute the multifactor productivity(MFP) (labor plus equipment) under the Prior to buying the new equipment. (Round to 4 decimal places)
b. Compute the % growth in productivity between the Prior and after buying the new equipment. (Round to 2 decimal places

Answer 1

Answer:

Multifactor productivity MFP before buying new equipment   = 0.7549 carts/dollar cost

Growth in productivity between the Prior and after buying the new equipment.  = 31.49%

Explanation:

Given that:

the number of workers before buying new equipment = 5

average cart production per hour = 77

worker's wage = $11

Cost of the machine = $47

After buying the new equipment;

number of worker is now = 4 since it is possible to transfer one of their worker to another department

average cart production per hour = $(77 +4) = $81

worker's wage = $11

Cost of the machine = $(47+14) = $61

The objective of this question is to "

a. Compute the multifactor productivity(MFP) (labor plus equipment) under the Prior to buying the new equipment.

Multifactor productivity MFP= Carts produced / (Labor cost + Equipment cost)

where;

Labor Cost = (Number of workers × Worker wage)

Multifactor productivity MFP = Carts produced / ((Number of workers × Worker wage)  + Equipment cost)

We are to find just only the multifactor productivity(MFP) (labor plus equipment) under the Prior to buying the new equipment.

i.e before buying the new equipment.

Multifactor productivity MFP  = 77/ (5 × 11) + 47)

Multifactor productivity MFP  = 77/ (55+ 47)

Multifactor productivity MFP  = 77/ (102)

Multifactor productivity MFP  = 77/ (102)

Multifactor productivity MFP  = 0.7549 carts/dollar cost

b. Compute the % growth in productivity between the Prior and after buying the new equipment. (Round to 2 decimal places

Growth in productivity = (Labor New productivity - Labor Old productivity) / Labor Old productivity] × 100

where;

Labor Productivity = Number of carts produced per hour / Number of workers

Labor Productivity (before buying new equipment) = 77/5

Labor Productivity (before buying new equipment) = 15.4 carts/worker/hour

Labor Productivity ( after buying the new equipment) = 81/4

Labor Productivity ( after buying the new equipment) = 20.25 carts/worker/hour

Growth in productivity = (20.25 - 15.40 /15.40) × 100

Growth in productivity = (4.85 / 15.40 )× 100

Growth in productivity = 0.3149 × 100

Growth in productivity = 31.49%