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 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 ​$260. Because some of the production process is​ automated, each guitar only requires 10 labor hours. Each employee works an average of 160 hours per month. Labor is paid at ​$11 per​ hour, materials cost is ​$40 per​ guitar, and overhead is ​$4 comma 2004,200.
a. The labor productivity ratio for​ Mack's guitar fabrication shop is ​$ nothing per hour. ​(Enter your response rounded to two decimal​ places.)

Answer 1

Answer: 21.32 per hour

Explanation:

Guitars produced each month = 100

considered good enough to sell = 82%

Remaining are scrapped = 18 %

Selling price of each guitar = $260

Each guitar requires = 10 labor hours

Each employee works an average = 160 hours per month

Labor is paid = ​$11 per​ hour

materials cost = ​$40 per​ guitar

overhead = $4,200

Therefore,

Number of guitars are good enough to sell = 82% of 100

                                                                   = 82 guitars

Value of output = Number of guitars sell × Selling price of each guitar

                        = 82 × $260

                        = $21,320

Input in labor hours = Guitars produced each month × Labor hour employed in each guitar

                               = 100 × 10

                               = 1,000 hours

Labor productivity =$\frac{output}{input}$

                                =  $\frac{21,320}{1,000}$

                                = 21.32 per hour