Question

Red Point Alloys BV produces cast bronze valves for use in offshore oil platforms. Currently, Red Point produces 1600 valves per day. The 20 workers at Red Point work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15-minute break during the morning work session and another at the afternoon work session Red Point is in a competitive industry and needs to increase productivity to stay competitive. They feel that a 20 percent increase is needed.

Red Point’s management believes that the 20 percent increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day.

a) Calculate labor productivity for the initial situation.
b) Calculate labor productivity for the hypothetical 20 percent increase. 

c) What is the productivity after the change in work rules?

Answer 1

a) Labor productivity=Total output /Total man-hours =Production/labor hours

Production =Number of valves produced per day =1600

Workers work from 7 am to 4 pm ,i.e 9 hours

Total off time =Lunch time off +break time during morning time session+break time during afternoon time session

=30+15+15 =60 min =1 hours

Number of labor hours per worker per day =9-1=8 hours

labor hours =Number of workers * Number of hours per day

=20* 8

=160 hours

Labor productivity=1600/160 =10 valves per hour

b.Labor productivity =1600*1.2/160

=12 valves per hour

c.Labor productivity =Production/Total labor hours =1800/160=11.25 valves per hour