Question

Problem 8 Question Help Mariah Enterprises makes a variety of consumer electronic products. Its camera manufacturing plant is considering choosing between two different processes, named Alpha and Beta, which can be used to make a component part. To make the correct decision, the managers would like to compare the labor and multifactor productivity of process Alpha with that of process Beta. The value of process output for Alpha and Beta is $200 per unit of product A and $160 per unit of product B, and the corresponding overhead costs for Alpha and Beta are $5,000 and $7,000, respectively. Process Beta Process Alpha B Product A B A Output (units) Labor ($) Materials (S) 60 40 50 70 $1,200 $1,400 $1,000 $2,000 $3,500 $3,000 $2,500 $1,400 a. Which process, Alpha or Beta, is more productive? has % higher labor productivity. Process has % higher multifactor productivity. (Enter your responses rounded to the nearest whole Process number.)

Answer 1

a)

Process Alpha,

Value of output for A and B = 200*60 + 160*40 = 18400

Multifactor productivity calculation,

value of input = Labour cost + materials cost + overhead cost

overhead cost = 5000
Labour cost = 1200+1400 = 2600
materials cost = 3500+3000 = 6500

value of input = 5000+2600+6500 = 14100

Multifactor productivity = Value of output/value of input = 18400/14100 = 1.304964539

Labour productivity calculation,
value of input = Labour cost = 2600
Labour productivity calculation = Value of output/value of input = 18400/2600 = 7.076923077

Process Beta,

Value of output for A and B = 200*50 + 160*70 = 21200

Multifactor productivity calculation,

value of input = Labour cost + materials cost + overhead cost

overhead cost = 7000
Labour cost = 1000+2000 = 3000
materials cost = 2500+1400 = 3900

value of input = 7000+3000+3900 = 13900

Multifactor productivity = Value of output/value of input = 21200/13900 = 1.525179856

Labour productivity calculation,
value of input = Labour cost = 3000
Labour productivity calculation = Value of output/value of input = 21200/3000 = 7.066666667

Process Alpha has ((7.076923077 - 7.066666667)/7.066666667)*100 = 0.145137877% = 0% (Rounded to nearest whole number) higher labour productivity

Process Beta has Beta has ((1.525179856 - 1.304964539)/1.304964539)*100 = 16.87519549% = 17% (Rounded to nearest whole number) higher multifactor productivity