A company that makes shopping carts for supermarkets and oth

A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduce the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 5 workers, who produced an average of 90 carts per hour. Workers receive $19 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $11 per hour while output increased by 5 carts per hour. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 2 decimal places.) Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 2 decimal places.) Comment on the changes in productivity according to the two measures. ( Round your intermediate calculations and final answers to 2 decimal places. Omit the \"%\" signs in your response.)

Solution

a) Labour Productivity

Before Number of Carts: 90

Before Number of Workers: 5

Labor Productivity = 90/5 = 18

After Number of Carts: (90 + 5) = 95

After Number of Workers: 4

Labor Productivity = 95/4 = 23.75

b) Multifactor productivity

Before: 90 carts

Number of workers: 5

Payment of each worker: 19$ and machine cost : 40$

Before multifactor productivity = 90/(5*19 + 40) = 0.667$

After: 95 carts

Payment of each worker (total four workers) : 19$ and machine cost : (40+11) = 51$

Before multifactor productivity = 95/(4*19 + 51) = 0.748$

c)

Labor Productivity (Percentage Increase)

=> (23.75 - 18)/18 * 100 = 31.94%

Multifactor Productivity (Percentage Increase)

=> (0.748 - 0.667)/0.667 * 100 = 12.14%