George Kyparisis makes bowling balls in his Miami plant With

George Kyparisis makes bowling balls in his Miami plant. With recent increases in his costs, he has a newfound interest in efficiency. George is interested in determining the productivity of his organization. He would like to know if his organization is maintaining the manufacturing average of a 3% increase in productivity. He has the following data representing a month from last year and an equivalent month this year:

Last Year

Now

Cost Per Input Unit

Units Produced      

1 comma 0001,000

1 comma 0001,000

Labor (hours)

300300

275275

$1212

Resin (pounds)

4848

4343

$55

Capital Invested ($)

10 comma 00010,000

11 comma 00011,000

22%

Energy (BTU)

2 comma 9002,900

2 comma 7502,750

$0.500.50

The percent change in productivity for one month last year versus one month this year on a multifactor basis with dollars as the common denominator = ____ %

(enter your response as a percentage rounded to two decimal places

Solution

Multifactor Productivity to be calculated for George Kyparisis making bowling balls in Miami plant :

Total cost for any year, $

= Cost / input unit x Labor hours + Cost/ input unit x Resin ( Pounds) + Cost / input unit x Capital invested + Cost / input unit x Energy (BTU)

= 12x Labour hours + 5 x Resin ( Pounds) + 22/100 x Capital invested+ 0.5 x Energy ( BTU )

Therefore,

Total cost for last year, $

= 12 x 300 + 5 x 48 + 0.22 x 10,000 +0.5 x 2900

= 3600 + 240 + 2200 + 1450

= $7490

Total cost now , $

= 12 x 275 + 5 x 43 + 0.22 x 11000 + 0.5 x 2750

= 3300 + 215 + 2420 + 1375

= $7310

Multifactor productivity for last year = Units produced/ Total cost = 1000/ 7490 = 0.1335

Multifactor productivity for this year = Units produced / Total cost = 1000/7310 = 0.1368

Percentage change in productivity

= ( Productivity this year – Productivity last year)/ Productivity last year x 100

= ( 0.1368- 0.1335)/0.1335 x 100

= 0.0033/ 0.1335 x 100

= 2.47 %

PERCENTAGE CHANGE IN RPODUCTIVITY = 2.47%