2.4: End of Chapter Problems

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Problem #1

Billco Windows and Doors is preparing their monthly productivity report. Their monthly costs are shown below. Calculate the a) labour productivity (output / labour hours), b) machine productivity (output / machine hours), and c) the multifactor productivity (output / labour cost + material cost + energy cost) of dollars spent on labour, materials, and energy. Average labour rate is $18.00.

Units produced: 1800

Labour hours: 1975

Machine hours: 425

Materials cost: $81000

Energy cost: $21600

Solution

a) Labour productivity (output / labour hours)
= 1800 / 1975
= .91 units per labour hour

b) Machine productivity (output / machine hours)
= 1800 / 425
= 4.23 units per machine hour

c) Multifactor productivity (output / labour cost + material cost + energy cost)
= 1800 / (1975 x $18 + $81000 + $21600)
= .013 units per dollar spent

Problem #2

A company makes seasonal jams and jellies. Yesterday they produced 420 jars of jam with five workers who each worked an 8-hour day. What was the labour productivity?

Solution

= 420 / (5 workers x 8 hours)
= 10.5 jars per worker hour

Problem #3

A greeting card company manufactured 3500 cards in one day. Labour cost was $1200, material cost was $90, and overhead was $450. What is the multifactor productivity?

Solution

= 3500 / ($1200 + $90 + $450)
= 2.01 cards per dollar of input

Problem #4

Joe has purchased a pizza franchise and is learning how to measure productivity. Calculate the a) food cost productivity, b) labour productivity, and c) total productivity. Also calculate the percent change for each measure.

	June	July
Sales	$52500	$59650
Food cost	$15750	$16702
Labour cost	$11550	$14912
Overhead cost	$3500	$3500

Solution

	June	July	% Change
a) Food cost productivity	52500 / 15750 = $3.33	59650 / 16702 = $3.57	(3.57 – 3.33) / 3.33 x 100 = +7.21%
b) Labour productivity	52500 / 11550 = $4.55	59650 / 14912 = $4.00	(4.00 – 4.55) / 4.55 x 100 = -12.09%
c) Total productivity	52500 / (15750 + 11550 + 3500) = $1.70	59650 / (16702 + 14912 + 3500) = $1.70	(1.70 – 1.70) / 1.70 x 100 = 0%

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