Compute the multifactor productivity measure for each of the weeks shown for production of

chocolate bars. What do the productivity figures suggest? Assume 40-hours work in a week and

an hourly wage of $12. Overhead is 1.5 times weekly labor cost. Material cost is $6 per pound.

Week Output (units) Workers Material (lbs)

1 30,000 6 450

2 33,600 7 470

3 32,200 7 460

4 35,400 8 480

 

4. A company that makes shopping carts for supermarkets and other stores recently purchased some

new equipment that reduces the labor content of the jobs needed to produce the shopping carts.

Prior to buying the new equipment, the company used five workers, who produced an average of

80 carts per hour. Workers receive $10 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 $10 per hour, while output increased by four carts per hour.

 

a. Compute labor productivity under each system. Use carts per worker per hour as the measure of

labor productivity.

 

b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus

equipment) as the measure.

 

c. Comment on the changes in productivity according to the two measures, and on which one you

believe is the more pertinent for this situation