Question

Problem 2-7

The following table shows data on the average number of customers processed by several bank service units each day. The hourly wage rate is $15, the overhead rate is 1.2 times labor cost, and material cost is $5 per customer.

Unit	Employees	Customers Processed / Day
A	5	38
B	6	44
C	5	56
D	3	31

a. Compute the labor productivity and the multifactor productivity for each unit. Use an eight-hour day for multifactor productivity.(Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)

Unit	Labor Productivity (customers per day per worker)	Multifactor Productivity (customers per dollar input)
A
B
C
D

b. Suppose a new, more standardized procedure is to be introduced that will enable each employee to process one additional customer per day. Compute the expected labor and multifactor productivity rates for each unit. (Round your "Labor Productivity" answers to 1 decimal place and "Multifactor Productivity" answers to 3 decimal places.)

Unit		Labor Productivity (customers per day per worker)		Multifactor Productivity (customers per dollar input)
A
B
C
D

Answer 1

Solution:

Hourly wage rate = $15

Labor cost = Hourly wage rate x Number of hours x Number of employees = $15 x 8 x Number of employees

Labor cost = $120 x Number of employees

Overhead rate = 1.2 x labor cost

Material cost = $5 per customer = $5 x Number of customers

(a) Labor productivity and Multifactor productivity:

Labor productivity = Number of customers / Number of employees

Multifactor productivity = Number of customers / Total cost

Total cost = Labor cost + Overhead cost + Material cost

The labor productivity and multifactor productivity for the given set of data is computed in the table below.

The calculated values are summarized in the table below:

(b) Revised Labor productivity and Multifactor productivity:

With new standardised procedure, each employee is able to process one additional customer per day. The revised labor productivity and multifactor productivity for the given set of data is computed in the table below.

The calculated values are summarized in the table below: