Question

Homework 7 over Chapter 12

1. For the previous month, the Bichsel Lounge served 1,500 customers with very few complaints. Their labor cost was $3,000; material cost was $800; energy cost was $200; and building lease cost was $1,500. They were open 26 days during the month, and the lounge has 20 seats. They are open six hours per day, and the average customer stay is one hour.

a. Calculate the single-factor productivities and the overall multiple-factor productivity. How could they improve the productivity?

b. Calculate the monthly capacity and the capacity utilization.

2. The Iarussi Legal Aide office assisted 126 people in June, 2013, with a staff labor cost of $3240. In June, 2014, the office provided assistance to 145 people with a labor cost of $3960. What was their productivity growth over this one-year period?

3. The Valentine Ski Company makes top-of-the-line custom snow skis for high-end ski shops and employs fifteen people at $20 per hour. Chris, the owner, wants to track several productivity performance measures using the data shown below.

Financial Information	2017 Results
Net sales	$205,000
Cost of goods sold (purchased items)	$32,000
Net income after taxes	$28,200
Current assets	$68,000
Current liabilities	$22,000
Avg. inventory value	$4,500
Inputs and Outputs
Skis produced	1,000
Labor hours	10,800
Lease payments	$24,000

a. Calculate the labor productivity, lease productivity, and material productivity.

b. Calculate the multiple-factor productivity. If the multiple factor productivity for 2016 was 0.004 skis/dollar, then what was the productivity growth from 2016 to 2017?

Answer 1

1.

a.         Single factor productivities:

Labor—0.5 customers/labor$;

Material—187.5 customers/material$;

Energy—750 customers/energy$;

Building—1 customer/lease$.

Multifactor productivity—0.27

Customers/total$.

They could improve productivity by improving capacity utilization, possibly increasing the number of hours they are open or adding seats.

b.         Capacity = 26(20) (6) = 3120 customers per month.

Utilization = 1500/3120 = 0.48 or 48%.

2.

P2013 = (126/3240) = .0389; P2014 = (145/3960) = .0366. Growth = (P2014 – P2013)/P2013 = - 5.9%

3.

a.

Labor = 1000 / 10800(20) = 0.005 skis / labor $; Lease = 1000 / 24000 = 0.042 skis / lease $; Material = 1000 / 32000 = 0.031 skis / material$

b.

MFP = 1000 / (10800(20) + 24000 + 32000) = 0.0037 skis/$

Growth = (.0037-.004) / .004 = - 0.075 or – 7.5% growth,