Current process:
Produced units = 400 units per hour
Revenue of production = Output = Produced unit * Selling price of units = 400 * 80 = $32,000 per hour
No. of workers = 20 workers
Cost of worker per hour = $15
Total cost of worker = 20*15 = $300 per hour
Overheads = 1.4 times labor cost = 1.4 * 300 = $420 per hour
Material cost per hour = $120
Total inputs = 300 + 420 + 120 = $840
Multifactor productivity = Outputs / Inputs = 32000 / 840 = 38.10
A) Answer: A) 38.10
Similarly, for new process
Produced units = 470 units per hour
Revenue of production = Output = Produced unit * Selling price of units = 470 * 80 = $37600 per hour
No. of workers = 22 workers
Cost of worker per hour = $15
Total cost of worker = 22*15 = $330 per hour
Overheads = 1.4 times labor cost = 1.4 * 330 = $462 per hour
Material cost per hour = $150
Total inputs = 330 + 462 + 150 = $942
Multifactor productivity = Outputs / Inputs = 37600 / 942 = 39.92
B) Answer: B) 39.92
C) Answer: A) The new process should be used because it has higher multifactor productivity ratio
The MacJunkin Company manufactures transmission parts. The current process uses 20 workers and produces 400 units...
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