Question

Hello

I really dont understand how to work this probelem. A viewed solution of how it is solved would very helpful.

it takes the Blacksburg shipyard twenty six weeks with 500 workers to build a small tanker. Material costs are $32 million and overhead costs are $2 million. Workers cost $40 per hour including benefits and work 40 hours per week. The ship sells for $75 million. What is the multifactor productivity ratio

Answer 1

Number of workers = 500

Time taken to build the tanker = 26 weeks

Number of work-hours per week = 40 hrs

Total number of hours worked = 26 x 40 = 1040 hrs

Labor rate = $40 per hour

Total labor cost = Number of workers x Labor rate x Total number of hours worked

= 500 x 40 x 1040 = $20,800,000

Material cost = $32,000,000

Overhead cost = $2,000,000

Total cost = Total labor cost + Material cost + Overhead cost

= 20,800,000 + 32,000,000 + 2,000,000

= $72,800,000

Selling price of Ship = $75,000,000

Multifactor productivity = Output / Input

= 75,000,000 / 72,800,000

= 1.03