Question

In: Operations Management

The Levy Box plant produces wooden packing boxes to be used in the local seafood industry....

The Levy Box plant produces wooden packing boxes to be used in the local seafood industry. Current operations allow the company to make 600 boxes per day, in two 8-hour shifts (300 boxes per shift). The company has introduced some moderate changes in equipment, and conducted appropriate job training, so that production levels have risen to 400 boxes per shift. Labor costs average $13 per hour for each of the 5 full-time workers on each shift. Capital costs were previously $4,000 per day, and rose to $4,200 per day with the equipment modifications. Energy costs were unchanged by the modifications, at $400 per day.

a) What is the firm's multifactor productivity (exhibit 2.5) before and after the changes?

b) What is the firm's labor hours productivity before and after the changes?

c) What is the percent change in the multifactor productivity before and after the changes?

Expert Solution

Let's note down all the important data:

Case 1 (current operation):

Production of boxes: 600 boxes/day

Total labors - 5

Shift Duration - 8 hrs.

Labor cost : $13/hr.

Capital Cost : $4000/day

Energy cost : $400/day

Case2 (Operation after modification):

Production of boxes : 800 boxes/day

Shift Duration - 8 hrs.

Labor cost : $13/hr.

Total labors:5

Capital Cost : $4200/day

Energy cost : $400/day

Ans 1: Multifactor productivity (MFP) is an effective evaluation of economic performance that compares the output to the combined inputs used to get that output.

MFP = Output/Combined Input

MFP before the change = 600 boxes / ($13x5x16 + $4000 + $400)

= 600/5440

0.110 boxes/dollar

MFP after the change = 800 boxes / ($13x5x16 + $4200 + $400)

= 800/5640

= 0.142 boxes/dollar

Ans 2: Labor productivity is workforce productivity.

Labor hour productivity = Output/Labor hour

Labor hour productivity before the change = 600 boxes/16 hr*5

= 600 /80

= 7.5 boxes/labor hour

Labor hour productivity before the change = 800 boxes/16 hr*5

= 10 boxes/ hour

Ans 3: % change in the multifactor productivity (MFP) = (MFP after the change-MFP before the change /MFP before the change) * 100

= (0.142 -0.110/0.110) * 100

= 29.09%

keosha answered 3 weeks ago

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