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 5 workers, who produced an average of 100 carts per hour. Workers receive $13 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 $11 per hour while output increased by 5 carts per hour. a. Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 2 decimal places.) Before carts per worker per hour After carts per worker per hour b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 2 decimal places.) Before carts/$1 After carts/$1 c. Comment on the changes in productivity according to the two measures. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" signs in your response.) Labor productivity increased by % Multifactor productivity increased by % rev: 03_15_2012 Explanation: a. Before: 100 ÷ 5 = 20.00 carts per worker per hour. After: 105 ÷ 4 = 26.25 carts per worker per hour. b. Before: $13 x 5 = $65 + $40 = $105; hence 100 ÷ $105 = 0.95 carts/$1. After: $13 x 4 = $52 + $51 = $103; hence 105 ÷ $103 = 1.02 carts/$1. c. Labor productivity increased by 31.25% (6.25/20.00). Multifactor productivity increased by 7.37% (.07/.95).

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 5 workers, who produced an average of 100 carts per hour. Workers receive $13 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 $11 per hour while output increased by 5 carts per hour.

   

a.	Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. (Round your answers to 2 decimal places.)

   

Before		carts per worker per hour
After		carts per worker per hour

  

b.	Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus equipment) as the measure. (Round your answers to 2 decimal places.)

   

Before		carts/$1
After		carts/$1

   

c.	Comment on the changes in productivity according to the two measures. (Round your intermediate calculations and final answers to 2 decimal places. Omit the  "%" signs in your response.)

   

Labor productivity	increased by %
Multifactor productivity	increased by  %

rev: 03_15_2012


Explanation: a.

Before: 100 ÷ 5 = 20.00 carts per worker per hour.

After: 105 ÷ 4 = 26.25 carts per worker per hour.

b.

Before: $13 x 5 = $65 + $40 = $105; hence 100 ÷ $105 = 0.95 carts/$1.

After: $13 x 4 = $52 + $51 = $103; hence 105 ÷ $103 = 1.02 carts/$1.

c.

Labor productivity increased by 31.25% (6.25/20.00).

Multifactor productivity increased by 7.37% (.07/.95).