Question

Mack's guitar fabrication shop produces lowcost, highly durable guitars for beginners.Typically, out of the 100 guitars that begin production eachmonth, only 82 percent are considered good enough to sell. The other 18 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 isautomated, each guitar only requires 12 labor hours. Each employee works an average of 160 hours permonth. Labor is paid at $9 perhour, materials cost is $42 perguitar, and overhead is $3800.Whatis the labor productivity ratio forMack's guitar fabrication shop?

Answer 1

Answer:

$17.08 per hour

Explanation:

The computation of the labor productivity ratio is shown below:

Labor productivity ratio = Total output ÷ Total labor hours

where,

Total output = Goods units × Selling cost per guitar

= 82 × $250

= $20,500

And, the total labor hours is

= Number of labors hours required × total production

= 12 labor hours × 100

= 1,200

So, the labor productivity ratio is

= $20,500 ÷ 1,200

= $17.08 per hour