Question

Collins Title Insurance Ltd. wants to evaluate its labor and multifactor productivity with a new comput- erized title-search system. The company has a staff of four, each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The new computerized title-search system will allow the processing of 14 titles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.

APPROACH c Collins uses Equation (1-1) to compute labor productivity and Equation (1-2) to com- pute multifactor productivity.

SOLUTION c Labor productivity with the old system: 32 labor@hours = .25 titles per labor@hour

Labor productivity with the new system: 14 titles per day = .4375 titles per labor@hour 32 labor@hours

8 titles per day Multifactor productivity with the old system: $640 + 400 = .0077 titles per dollar

14 titles per day Multifactor productivity with the new system: $640 + 800 = .0097 titles per dollar

(a) What is the pay rate (hourly wage) that Collins Title Insurance pays its workers?

(b) If the new computerized title-search system allows processing 9 titles per day, would there be an increase in multifactor productivity with the new system?

(b) What title processing rate (titles per day) would need to be achieved with the new system in order to keep productivity exactly the same as the current process?

(d) What is the maximum overhead associated with the new system beyond which there would be no gain in productivity?