Productivity

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PROBLEMS (PRODUCTIVITY)

1. 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.

2. A fast food restaurant serves hamburgers, cheeseburgers, and chicken sandwiches. The
restaurant counts a cheeseburger as equivalent to 1.25 hamburgers and chicken
sandwiches as 0.8 hamburger. Current employment is five full-time employees (who
work a 40-hour week). If the restaurant sold 700 hamburgers, 900 cheeseburgers and
500 chicken sandwiches in one week, what is its productivity? What would its
productivity have been if it had sold the same number of sandwiches (2,100) but the
mix was 700 of each type?

3. A parcel delivery company delivered 103,000 packages in 2001 when its average
employment was 84 drivers. In 2002 the firm handled 112,000 deliveries with 96
drivers. What was the percentage change in productivity from 2001 to 2002?

4. A retail store had sales of $45,000 in April and $56,000 in May. The store employs
eight full-time workers (they work a 40-hour week) to complete. In April the store also
had seven part-time workers at 10 hours per week, and in May the store had nine part-
timers at 15 hours per week (assume four weeks in each month). Using sales dollars as
the measure of output, what is the percentage change in productivity from April to
May

5. The following table shows data on the average number of customers processed by
several bank service units each day. The hourly wage rate is $25, the overhead rate is
1.0 times labor cost and material cost is $5 per customer.
Unit Number of employees Customers Processed
A 4 36
B 5 40
C 8 60
D 3 20
a. Compute the labor productivity and the multifactor productivity for each unit.
b. Suppose a new, more standard procedure is to be introduced that will enable each
employee to process one additional customer per day. Compute the expected labor and
multifactior productivity rates for each unit. For multifactor productivity assume an 8-
hour day.
c. Calculate the change in labor productivity that will be caused by using the standard
procedure for unit A

5. A health club has two employees who work on lead generation. Each employee
works 40 hours a week and is paid $20 an hour. Each employee identifies an average of
400 possible leads a week from a list of 8,000 names. Approximately 10 percent of the
leads become members and pay a one-time fee of $100. Material costs are $130 per week
end overhead costs are $1,000 per week.
a. Calculate the multifactor productivity for this operation in fees generated per dolar
input.
b. Calculate the productivity growth (decrease) assuming that the multifactor
productivity was 3,10 in the previous week

6. A company is looking for a software in order to automate the accreditation


service that is already done by workers. Workers who are paid $2 per minute now
complete this job in 40 minutes without using any software. The customer pays $400 in
order to get this service. The software of Company A will decrease the completion time
to 10 minutes. The cost of Company A’s software is $3.5 for each accreditation service
provided to the customer. Company B’s software decreases the time required to 12
minutes, its cost is $3.6 for the accreditation service provided to each customer. Which
alternative will yield the largest productivity increase.

7. A sports center aiming to increase membership has decided to make


promotion. For this purpose 50 employees are hired in order to get into face-to-face
contact with people who live in Ankara. Each employee can contact with 2 people per
hour. 20 percent of these people applies for membership and pays 10.000 TL. to become
a member. Employees work 8 hours per day during the 5-day week. Hourly wages are 10
TL/hour. Weekly general expenses are 5.000 TL.

The manager considers the alternative of using telephone calls instead of face-to-face
contact. In this context the number of employees is decreased to 10. Again the employees
work for 8 hours/day, 40 hours/week and gain $10/hour. The duration of telephone calls
is limited to 5 minutes. 1 out of 10 people reached, is expected to get registered to the
sports center. And they will pay 10.000 TL as an entrance fee. In this case, general
expenses is assumed to increase to 9.000 TL./week

a. Which alternative should be chosen in terms of labor productivity criteria?


b. Which alternative should be chosen in terms of multifactor productivity?
c. Calculate the increase/decrease in labor productivity that will be caused by shifting
from face-to-face contact to telephone calls
d. Which of the two productivity measures is to produce the best solution? 1) labor
productivity; 2) multi-factor productivity? Why?

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