Question

Mack's guitar fabrication shop produces low cost, highly durable guitars for beginners. Typically, out of the 100 guitars that begin production each month, only 80 percent are considered good enough to sell. The other 20 percent are scrapped due to quality problems that are identified after they have completed the production process. Each guitar sells for $250. Because some of the production process is automated, each guitar only requires 12 labor hours. Each employee works an average of 160 hours per month. Labor is paid at $11 per hour, materials cost is $42 per guitar, and overhead is $4,000. a. The labor productivity ratio for Mack's guitar fabrication shop is per hour. The multifactor productivity ratio for Mack's guitar fabrication shop is .

Answer 1

Answer:

a. Labor productivity is 16.67 per hour

b. Multifactor productivity = 0.93

Explanation:

a.

Number of guitars produced = 100

Guitars good enough to sell = 80%

Number of guitars good enough to sell = 80% * 100 = 80 guitars.

Selling per price = 250

Labour hours per guitar = 12 hours

Value of output = 250 * 80 = 20.000

input in labor hourse = guitars produced * labors per guitar = 100 * 12 = 1200 hours

Labor productivity = output/input = 20.000 / 1.200 = 16.67 per hour

Therefore, labor productivity is 16.67 per hour

b.

labor cost = 11 per hour

material cost= 42 per guitar

overhead cost = 4.000

total labor cost = guitars produced* labor cost per hour*labor hours per guitar

= 100*11*12

=13.200

Total material cost = guitars produced * material cost per guitar = 100 * 42 = 4.200

Multifactor productivity = output / labour cost + material cost + overhead cost

Multifactor productivity = 20.000 / (13200 + 4200 + 4000)

Multifactor productivity = 20.000 / 21.400

Multifactor productivity = 0.93