Problems

1. The Cool-Tech Company produces various types of fans. In May, the company produced 1,728 window fans at a standard price of $40.00. The company has 12 direct labor employees whose compensation (including wages and fringe benefits) amounts to $21.00 per hour. During May, window fans were produced on 9 working days (of 8 hours each), and other products were produced on other days. Determine the labor productivity of the window fans.

2. The Cool-Tech Company (see # 1) also produces desk fans at a standard price of $25.00. During May, 1,872 desk fans were produced on 11 working days (of 8 hours each). On one day, two employees called in sick.

1. Determine the labor productivity of the desk fans.
2. Was productivity higher for the window fans or for the desk fans in May?

3. Here is additional information about the Cool-Tech Company (see #1 & #2). There were 20 working days in May. The direct material cost of window fans is $7.00; the direct material cost of desk fans is $5.00. The annual overhead expense incurred in operating the factory is $144,000.

1. Determine the multi-factor productivity of the Cool-Tech Company in May.
2. What is the interpretation of the multi-factor productivity?

4. In June, the Cool-Tech Company produced 1,730 window fans (see #1) in 10 working days.
What was the percentage change in labor productivity of window fans from May?

Solutions

1. P = Productivity
W = Number of window fans = 1728
H = Number of direct labor hours = 8 hours per day
E = Number of employees = 12
D = Number of working days = 9
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image19::/sites/dl/free/0072443901/24520/Image19.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image19 (1.0K)</a>Image19 fans per hour.

2. P = Productivity
F = Number of desk fans = 1,872
H = Number of direct labor hours = 8 hours per day
E₁ = Number of employees = 12;         E₂ = Number of employees = 12 - 2 = 10
D₁ = Number of days = 11 - 1 = 10    D₂ = Number of days = 1

1. <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image24::/sites/dl/free/0072443901/24520/Image24.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image24 (1.0K)</a>Image24 fans per hour.
2. The productivity of the window fans is higher.

3. P = Multi-factor productivity
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image25::/sites/dl/free/0072443901/24520/Image25.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image25 (0.0K)</a>Image25 Standard price of window fans = $40
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image26::/sites/dl/free/0072443901/24520/Image26.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image26 (0.0K)</a>Image26 Standard price of desk fans = $25
L = Labor cost per hour = $21
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image27::/sites/dl/free/0072443901/24520/Image27.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image27 (0.0K)</a>Image27 Direct material cost of window fans = $7
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image28::/sites/dl/free/0072443901/24520/Image28.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image28 (0.0K)</a>Image28 Direct material cost of desk fans = $5
H = Total direct labor hours = 864 + 1040 = 1904

1. <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image29::/sites/dl/free/0072443901/24520/Image29.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image29 (2.0K)</a>Image29
2. A dollar's worth of inputs produces $1.89 worth of outputs.

4. <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image30::/sites/dl/free/0072443901/24520/Image30.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image30 (0.0K)</a>Image30 2 fans per hour (Problem #1)
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image31::/sites/dl/free/0072443901/24520/Image31.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image31 (1.0K)</a>Image31 fans per hour
Productivity Growth <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Image32::/sites/dl/free/0072443901/24520/Image32.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Image32 (1.0K)</a>Image32
Productivity declined from May to June.