Question

The weekly out rate of a production process is shown below, together with data for labor, material inputs, and energy. The overhead cost is charged weekly at the rate of 500 plus 0.25 times direct labor cost. Assume a 40-hour week and an hourly wage of $12. Material cost is $6.5 per running foot. The energy cost is $0.05 per kWh. What is the average multifactor productivity for this process?

Week      Output      Number of workers      Materials (ft)      Energy (kwh)

1                1240            12                           1820                   15000

2                1300            16                           1912                   16500

3                1168            14                           1765                   14300

4                1121           11                           1700                   12000

5                1243            18                           1867                  16000

Answer 1

Average multifactor productivity for 5 weeks is as shown in the table below. Columns in green are added for calculation purpose:

As seen from above, the average multifactor productivity for the process = 17.72 units per $

The formula for calculation of each value is as shown in 2nd row of the table.