Question

Submit Assignment for Grading Save Problem 2-06 Algorithmic ns 4 Question 3 of 9 Check My Work (a remaining) eBook A hamburger factory produces 45,000 hamburgers each week. The equipment used costs $8,000 and will remain productive for three years. The labor cost per year is $13,000. a. What is the productivity measure of "units of output per dollar of input" averaged over the three-year period? Assume that there are 52 weeks per year. Round your answer to one decimal place. hamburgers/dollar Productivity: b. The company has the option of purchasing equipment for $11,500, with an operating life of four years. It would reduce labor costs to $10,500 per year. Should it consider purchasing this equipment (using productivity arguments alone)? Assume that there are 52 weeks per year. Round your answer for productivity to one decimal place. For the expensive machine, productivity is -Select-investment based on this single criterion. hamburgers/dollar input. Because the productivity of the expensive machine is-Select it would be a -Select higher lower Check My Work (1 remaining) DXLL

Answer 1

A)

The number of hamburgers produced in 3 years

Number of hamburgers produced in a week x No. of weeks in a year x No. of years

45000 x 52 x 3 = 7020000

Aggregate Cost of input in 3 years

Fixed cost + Aggregate labour cost of 3 years

$8000 + $13000x 3 = $47000

Productivity

Number of hamburgers produced / Aggregate cost of inputs

7020000/47000

= 150 hamburgers per dollar

B)

New Aggregate Cost of input in 3 years

$11500 + $10500x3 = $43000

New productivity

7020000/43000

= 164 hamburgers per dollar

yes, the company should purchase new equipment.

The productivity of the new machine is higher, it would be a productive investment.