The following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $20, the overhead rate is 1 times labor cost, and the material cost is $6 per customer.

Units              Employees             Customers Processed

  A                       3                             38

  B                       6                             43

  C                       4                             60

  D                       4                             30

a.Compute the labor productivity and the multifactor productivity for each unit. Use an 8 hour day for multifactor productivity.  (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)

                     Labor Productivity                  Multi-factor Productivity

Unit     (customers per day per worker)    (customer per dollar input)

A                  _______                                        _______

B                  _______                                        _______

C                  _______                                        _______

D                  _______                                        _______

b. Suppose a new, more standardized procedure is to be introduced that will enable each employee to process one additional customer per day. Compute the expected labor and multifactor productivity rates for each unit.  (Round your "Labor Productivity" answers to 1  decimal place and "Multifactor Productivity" answers to 3 decimal places.)

 

ANSWERS:

A

• UNIT A 12.7 & 0.032
• UNIT B 7.17 & 0.020
• UNIT C 15 & 0.037
• UNIT D 7.5 & 0.021

B

• UNIT A 13.7 & 0.034
• UNIT B 7 & 0.022
• UNIT C 8 & 0.038
• UNIT D 8.5 & 0.023

Step-by-step explanation

Labor productivity = Customer processed per day/Number of employees per day

Multifactor productivity = Customer processed per day/(Labor cost per day + Overhead cost per day + Material cost per day)

Labor cost = Number of hours per day*Hourly wage rate*Number of employees = 8*20*Number of employees

Overhead cost = Labor cost*1

Material cost = Number of customers processed*Cost per customer = Number of customer processed*6

a)

Unit A:

Labor productivity = 38/3 = 12.7 customer per employee

Multifactor productivity = 38/(160*3+160*3*1+38*6) = 0.032 customer per dollar input

Unit B:

Labor productivity = 43/6 = 7.17 customer per employee

Multifactor productivity = 43/(160*6+160*6*1+43*6) = 0.020 customer per dollar input

Unit C:

Labor productivity = 60/4 = 15 customer per employee

Multifactor productivity = 60/(160*4+160*4*1+60*6) = 0.037 customer per dollar input

Unit D:

Labor productivity = 30/4 = 7.5 customer per employee

Multifactor productivity = 30/(160*4+160*4*1+30*6) = 0.021 customer per dollar input

b) Now number of customers per employee is increased by 1, so, labor productivity and multifactor productivity needs to be computed with increased number of customers as:

Unit A:

Labor productivity = 41/3 = 13.7 customer per employee

Multifactor productivity = 41/(160*3+160*3*1+41*6) = 0.034 customer per dollar input

Unit B:

Labor productivity = 49/7 = 7 customer per employee

Multifactor productivity = 49/(160*6+160*6*1+49*6) = 0.022 customer per dollar input

Unit C:

Labor productivity = 64/8 = 8 customer per employee

Multifactor productivity = 64/(160*4+160*4*1+64*6) = 0.038 customer per dollar input

Unit D:

Labor productivity = 34/4 = 8.5 customer per employee

Multifactor productivity = 34/(160*4+160*4*1+34*6) = 0.023 customer per dollar input