Charles Lackey operates a bakery n ldaho Falls Ida Because o

Charles Lackey operates a bakery n ldaho Falls Ida Because of its excellent product and excelent location, demand has increased by 35% n the last year. On ar too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes 1,500 loaves per month. The pay will be $8 per hour for employees and each employee works 160 hours per month Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of S125 per month, but he will achieve the same new output (an increase to 2,025.00) as the change in labor hours. a) Current productivity for 640 work hours293 loaves/dollar (round your response to three decimal places) If Charles chooses to increase the number of work hours to 864 in order to employ the new oven loading technique, then the productivity is293 loaves/dollar (round your response to three decimal places). b)f Charles instead chooses to purchase a new blender (while holding labor constant at 640 hours at $8 per hour), then the productivity is386 loaves/dollar (round your response to three decimal places) c) By adding manpower, the percentage increase in productivity is% (enter your response as a percentage rounded to two decimal places and include a minus sign if necessary)

Solution

a) For 640 work hours, Labor cost per month = 640 work hours * $ 8 per hour = $ 5120 per month

Current productivity for 640 work hours = Output / Labor cost = 1500 loaves per month / $ 5120

= 0.293

After improved loading process, Output increases by 35% = 1500*1.35 = 2025 loaves per month

Productivity = 2025 / (864*8) = 0.293

b) Productivity = Output / Total cost = 2025 / (640*8 + 125)

= 0.386

c) By adding manpower, the percentage increase in productivity = (0.293-0.293)/0.293 = 0 %