Question

16. Probett's Auto Body Repair Shop had revenues that averaged $90,000 per week in April and $80,000 per week in May. During both months, the shop employed six full-time (40 hours/week) workers. In April the firm also had four part-time workers working 25 hours per week but in May there were only 2 part-time workers and they only worked 10 hours per week. What is the percentage change in labor productivity from April to May for Probett's Auto Body Repair?

Answer 1

Answer:

productivity of labor increased by 16.24% in May respect to April

Which means the company was experimenting diminished return in their labor facot as reducing their quantity increase the marginal revenue generated

Explanation:

April productivity:

revenue $90,000

labor used: 40 x 6 + 25 x 4 = 340

productivity of labor:

90,000 / 340 = 264,70 each hour of labor generate 264.70 dollar of revenue

May productivity:

revenue 80,000

labor used: 40 x 6  +  2 x 10 = 260

productivity:

80,000 / 260 = 307,6923 = 307.69

each hour of labor gneerated $307.69 dollar of revenue

percentage change

307.69/264.70 - 1 = 0,16241