Mariah Enterprises makes a variety of consumer electronic pr

Mariah Enterprises makes a variety of consumer electronic products. Its camera manufacturing plant is considering choosing between two different processes, named Alpha and Beta, which can be used to make a component part. To make the correct decision, the managers would like to compare the labor and multifactor productivity of process Alpha with that of process Beta. The value of process output for Alpha and Beta is

$200

per unit of product A and

$130

per unit of product B, and the corresponding overhead costs for Alpha and Beta are

$8000

and

$4000

respectively.

Process Alpha

Process Beta

Product

A

B

A

B

Output (units)

70

40

60

30

Labor ($)

1200

1400

1000

2000

Materials ($)

$3500

2500

$1400

a. Which process, Alpha or Beta, is more productive?

Process

blank

has

blank

higher labor productivity. Process

blank

has

blank

higher multifactor productivity. (Enter your responses rounded to the nearest whole number.)

	Process Alpha	Process Beta
Product	A	B	A	B
Output (units)	70	40	60	30
Labor ($)	1200	1400	1000	2000
Materials ($)	$3500	1500	2500	$1400

Solution

Process Alpha :

Total value of process output

= $200/ unit of A x 70 units of A + $ 130 / unit of B x 40 units of B

= $14000 + $5200

= $19200

Total Labor cost

= Labor cost for A + Labor cost for B

= 1200 + 1400

= $2600

Thus,

Labor productivity= Total value of process output / Total labor cost = 19200 / 2600 = 7.384

Total material cost

= Material cost for A + Material cost for B

= $3500 + $1500

= $5000

Overhead cost = $8000

Thus, total cost = Labor cost + Material cost + Overhead cost = $2600 + $5000 + $8000 = $15600

Multifactor productivity = Total value of process / Total cost = 19200 /15600 = 1.23 ( 1 rounded to nearest whole number )

Process Beta:

Total value of process output

= $200/ unit of A x 60 units of A + $ 130 / unit of B x 30 units of B

= $12000+ $3900

= $15900

Total Labor cost

= Labor cost for A + Labor cost for B

= 1000 + 2000

= $3000

Thus,

Labor productivity Total value of process output / Total labor cost =   15900 /3000 = 5.3

Total material cost

= Material cost for A + Material cost for B

= $2500 + $1400

= $3900

Overhead cost = $4000

Thus, total cost = Labor cost + Material cost + Overhead cost = $3000 + $3900 + $4000 = $10900

Multifactor productivity = Total value of process / Total cost = 15900 / 10900 = 1.458 ( 1 rounded to nearest whole number)

Labor productivity of Alpha ( 7.384 ) > Labor productivity Beta ( 5,3)

Multifactor productivity of Beta ( 1.458 ) > Multifactor productivity of alpha ( 1.23 )

ALPHA HAS HIGHER LABOR PRODUCTIVITY

BETA HAS HIGHER MULTIFACTOR PRODUCTIVITY

ALPHA HAS HIGHER LABOR PRODUCTIVITY

BETA HAS HIGHER MULTIFACTOR PRODUCTIVITY