Tuesday 6 August 2013

Ayssa's Custom Cakes currently sells 6 birthday, 5 wedding, and 4 specialty cakes each month for $40,

Ayssa's Custom Cakes currently sells 6 birthday, 5 wedding, and 4 specialty cakes each month for $40, $180, and $120 each respectively. The cost of labor is $60 per hour including benefits. It takes 90 minutes to produce a birthday cake, 240 minutes to produce a wedding cake, and 60 minutes to produce a specialty cake. Alyssa's current multifactor productivity ratio is 1.20.

What is Alyssa's labor productivity ratio in dollars per hour for the birthday cakes?
Solution:
Sale price per birthday cake                                                              = $40
Labor time per birthday cake in hours (90 minutes / 60 minutes) *            =  1.50 hours per cake
Labor productivity ratio in dollars per hour for the birthday cakes = Sale price per cake / labor time per birthday cake
                        = $40 / 1.50
                        = $26.67 per hour

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