For the previous month the Ellram Lounge served 1500 custome

For the previous month, the Ellram Lounge served 1,500 customers with very few complaints. Their labor cost was $3,000; material cost was $800; energy cost was $200. and building lease cost was $1500. They were open 26 days during the month and the lounge has 20 seats. They were open six hours per day and the average customer stay is one hour.

a. Calculate the single-factor productivities and the overall multiple-factor productivity. How could they improve productivity?

b. Calculate the monthly capacity and capacity utilization.

Solution

Single Factor Productivity is defined as the output divided by a single input. So the single factor productivities are as given below:

PRoductivity(Labor Cost) = 1500/3000 = 0.5 Customers/$ of Labor Cost

PRoductivity(MAterial Cost) = 1500/800 = 1.625 Customers/$ of MAterial Cost

PRoductivity(Energy Cost) = 1500/200 = 7.5 Customers/$ of Energy Cost

PRoductivity(Lease Cost) = 1500/1500 = 1 Customers/$ of Lease Cost

Multi-factor productivity is the productivity determined by summing all the inputs and thenm finding the productivity.

MFP=Output/(Labor Cost+MAterial Cost+Energy Cost+LEase Cost) = 1500/5500 = 0.272

Productivty can be improved by downsizing the workforce which has the lowest productivity in terms of factors. I

B The capacity of the shop can be calculated as available hours for customers to sit in the louge

No of Seats = 20, No of Hours open a day = 6 hours

Thus number of seat hours per day = 120hrs

Number of days they open every month is 26 days so the number of hours available in the month = 26 x 120 = 3120hours

This is the capcity of the Lounge

Each customer stays one hour and there were 1500 customers. Thus the utilization is 1500 hours.