Question

6. Tyson Foods, Inc. processes 2,500 hogs a day at one of its plants, and it does this processing 5 days per week. The processing equipment costs $33.6 million dollars and will remain productive for 10 years. The processing plant is approximately 140,000 square feet. The plant employees 129 employees that work 7.5 hours per day at an average wage of $15.44/hr. a. What is the productivity as measured in units of output per dollar of input over the 10-year period? b. Management has the option of upgrading its current equipment at 10% of its current costs. This will increase the operating life of the plant for 3 more years. It would also reduce labor costs by 22%. Should management purchase these upgrades (using productivity calculations alone)?

Answer 1

answer to part a

answer to part b

The productivity calculations show that the productivity would be increased slightly if the option is taken but since there will not be a major impact hence the management should not consider this on just the basis of productivity calculations.