A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers, who produced an average of 80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by S10 per hour, while output increased by four carts per hour. A) Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. B) Compute the multifactor productivity under each system. Use carts per dollar cost (laborplus equipment) as the measure. C) Comment on the changes in productivity according to the two measures, and on which one you believe is the more pertinent for this situation.

A company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers, who produced an average of 80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by S10 per hour, while output increased by four carts per hour. A) Compute labor productivity under each system. Use carts per worker per hour as the measure of labor productivity. B) Compute the multifactor productivity under each system. Use carts per dollar cost (laborplus equipment) as the measure. C) Comment on the changes in productivity according to the two measures, and on which one you believe is the more pertinent for this situation.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 9E

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