Supplier XYZ is a reputable organization which provides a cr

Supplier XYZ is a reputable organization which provides a crucial part needed for manufacturing your product. They have 10 employees, and they all work for 8 hours everyday Their employees are paid $500 for everyday they work, plus they accumulate overhead expenses of $200 a day. XYZ produces 10 components everyday. However, you would like them to increase their output to 15 per day to match your needs. To meet their new quota, they have implemented a new system which allows them to produce 15 components everyday. However, this has resulted in the increase of the overhead expenses to $850 a day. The employee pay rate and their work hours are still the same. Calculate the percentage increase in their multifactor productivity. (please provide the percentage, for example if the result is 34% then insert 34 only) Your Answer:

Solution

Scenario under old system :

Number of components produced everyday = 10

Total cost of employees per day = $500 / employee x 10 employees = $5000

Accumulated overhead expenses = $200

Total cost = Cost of employees + accumulated overhead expenses = $5000 + $200 = $5200

Multifactor productivity = Number of components produced per day / Total cost per day = 10 / 5200 = 0.001923

Scenario under new system :

Number of components produced everyday = 15

Total cost of employees per day = $500 / employee x 10 employees = $5000

Accumulated overhead expenses = $850

Total cost = Cost of employees + accumulated overhead expenses = $5000 + $850= $5850

Multifactor productivity = Number of components produced per day / Total cost per day = 15/5850 = 0.002564

Percentage increase in Multifactor Productivity

= ( Multifactor productivity under new system – Multifactor productivity under old system)/ Multifactor productivity under old system x 100

= ( 0.002564 – 0.001923) / 0.001923 x 100

= 0.000641/ 0.001923 x 100

= 33.33 %

PERCENTAGE INCREASE IN MULTIFACTOR PRODUCTIVITY = 33.33

PERCENTAGE INCREASE IN MULTIFACTOR PRODUCTIVITY = 33.33