Over a fourweek period the operations section collected info

Over a four-week period the operations section collected information on inputs and output. As a favor to you they formatted the information into the following table.

Each employee worked a 40-hour week. Overhead (which includes all other expenses) is 150 percent of the labor cost. Wages are $17 per hour. Materiel costs $7 per pound. The standard revenue for the output is $150 per unit. Compute the multi-factor productivity for each week. Do the productivity figures suggest anything (e.g., trends)? Explain.

Solution

Total cost for any week

= Labor cost + Overhead cost + Material cost

= Labor cost + 1. x 50Labor cost + Material cost

= 2.50 x Labor cost + Material cost

= 2.50 x Wages/ hour x Number of hours/ week x Number of employees + Material cost / Pound x Quantity of Material ( Pounds)

= 2.5 x 17 x 40 x Number of employees + 7x Quantity of Material ( Pounds)

= 1700 x Number of employees + 7 x Quantity of material ( Pounds )

Total revenue for any week = Revenue/ unit x Number of units of output = 150 x Number of units of output

Therefore ,

For week 1 :

Total revenue, $ = 150 x 301 = $45150

Total cost , $ = 1700 x 6 + 7 x 45 = 10200 + 315 = 10515

Multifactor productivity = Total revenue / Total cost = 45150 /10515 = 4.293

For week 2 :

Total revenue, $ = 150 x 338 = $ 50700

Total cost , $ = 1700 x 7 + 7 x 46 = 11900 + 322 = 12222

Multifactor productivity = Total revenue / Total cost = 50700/12222 = 4.148

For week 3 :

Total revenue, $ = 150 x 322 = $ 48300

Total cost , $ = 1700 x 7 + 7 x 46 = 11900 + 322 = 12222

Multifactor productivity = Total revenue / Total cost = 48300 /12222 = 3.951

For week 4 :

Total revenue, $ = 150 x 354   = $ 53100

Total cost , $ = 1700 x 8 + 7 x 48 = 13600 + 336 = 13936

Multifactor productivity = Total revenue / Total cost = 53100 / 13936 = 3.810