Question

Charles Lackey operates a bakery in Idaho​ Falls, Idaho. Because of its excellent product and excellent​ location, demand has increased by 25​% in the last year. On far too many​ occasions, customers have not been able to purchase the bread of their choice. Because of the size of the​ store, no new ovens can be added. At a staff​ meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by​ hand, requiring additional manpower. This is the only thing to be changed.  The bakery currently makes 1800 loaves per month. The pay will be ​$8 per hour for employees and each employee works 160 hours per month.

Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of ​$100 per​ month, but he will achieve the same new output​ (an increase to 2250.00 ​) as the change in labor hours. ​

a) Current productivity for 640 work hours​ = nothing ​loaves/dollar ​(round your response to three decimal​ places). If Charles chooses to increase the number of work hours to 800 in order to employ the new oven loading​ technique, then the productivity is​ = nothing ​loaves/dollar ​(round your response to three decimal​ places). ​

b) If Charles instead chooses to purchase a new blender​ (while holding labor constant at 640 hours at ​$8 per ​hour)​, then the productivity is​ = nothing ​loaves/dollar ​(round your response to three decimal​ places).

​c) By adding​ manpower, the percentage increase in productivity is nothing​% ​(enter your response as a percentage rounded to two decimal places and include a minus sign if​ necessary). By purchasing a new blender​ (while holding labor constant at 640 hours at ​$8 per ​hour)​, the percentage increase in productivity is nothing​% ​(enter your response as a percentage rounded to two decimal places and include a minus sign if​ necessary).

Answer 1

Answer to question (a)

Current Productivity for 640 work hours.

Number of loaves currently produced = 1800 per month

Monthly cost of work force = 640 hours * $ 8 = $ 5120

Current Productivity for 640 work hours = 1800 / 5120 = 0.351 loaves/dollar

Productivity if work hours is increased to 800 by employing additional person

Number of loaves produced = 2250 per month

Monthly cost of work force = 800 hours * $ 8 = $ 6400

Productivity for 800 work hours = 2250 / 6400 = 0.351 loaves/dollar

Answer to question (b)

Productivity if new blender is purchased without changing work force.

Number of loaves produced = 2250 per month

Monthly cost of work force = 800 hours * $ 8 = $ 6400

Increase in monthly cost due to blender = $ 100

Productivity for 640 work hours with blender = 2250 / (5120+100) = 0.431 loaves/dollar

Answer to question (c)

Percentage change in productivity by adding manpower is 0% since there is no change.

Percentage change in productivity by adding blender is (0.431-0.351)/0.351 i.e 22.79%.