Suppose the following data represents the produced units by applied new production systems, sold price for...
Suppose the following data represents the produced units by applied new production systems, sold price for each unit in each system, the required labor hours for production, the labor hour cost, and the overhead for each production process. Products AED/unit Old System production 4000 100 New system production 6000 120 Old System Labor hours 400 10 New System Labor hours 500 12 Old System overheads 1000 New System overheads 1500 a) Calculate labor productivity for the two systems and Calculate the labor cost productivity for the two systems b) Calculate the multifactor productivity for the two systems c) Compare between the productivity in each measure and comment.
Homework Answers
Labor Productivity:
For old system:
No of products = 4000
Labor hours required = 400
Hence Labor productivity = (Labor hours/no of products) = 4000/400 = 10 units per hour
For new system:
No of products = 6000
Labor hours required = 500
Hence Labor productivity = (Labor hours/no of products) = 6000/500 = 12 units per hour
Labor cost productivity
For old system:
No of products = 4000
Labor hours required = 400
Labor cost per hour = $10
Total labor cost = 400*10 = 4000
Hence Labor cost productivity = labor cost/no of products = 4000/4000 = $1 per unit
For new system:
No of products = 6000
Labor hours required = 500
Labor cost per hour = $12
Total labor cost = 500*12 = 6000
Hence Labor cost productivity = labor cost/no of products = 6000/6000 = $1 per unit
Multifactor Productivity:
Multifactor productivity = Units of Output / (Units of Labor + Units of Capital + Units of overhead)
For old system:
No of products = 4000
Labor hours required = 400
Labor cost per hour = $10
Total labor cost = 400*10 = 4000
Overhead cost = $1000
Cost per unit = $100
For 4000 units cost = $400000
Multifactor productivity = 4000/($4000+$400000+$1000) = 4000/(405000) units per dollar
If we count in dollar per unit: it will be 405000/4000 = $101.25 per unit.
For old system:
No of products = 6000
Labor hours required = 500
Labor cost per hour = $12
Total labor cost = 500*12 = 6000
Overhead cost = $1500
Cost per unit = $120
For 6000 units cost = $720000
Multifactor productivity = 6000/($6000+$720000+$1500) = 6000/(727500) units per dollar
If we count in dollar per unit: it will be 727500/6000 = $121.25 per unit.
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