5(b)

Calculation for old process for 1 hour production of 60 units:

Revenue earned from production of 1 hour = 60 units x $31/ unit = $1860

Labour cost = $12/worker hour x 5 workers = $60
Overhead cost (1.6 times labour cost ) = $60 x 1.6 = $96
Material cost = $16 / unit x 60 units = $960
So, the total cost = $60 + $96 + $960 = $1116

Hence productivity = Revenue / Total cost

= 1860 / 1116 = 1.666

Calculation for new process for 1 hour production of 60 units :

Revised output per hour after 25% increase in output =1.25 x 60 = 75

Revenue earned from 1 hour production of 75 units = 75 x $31 = $2325
Labour cost = $12/worker hour x 6 workers = $72 ( one additional worker in now required )
Overhead cost (1.6 times labour cost ) = $72 x 1.6 = $115.20
Material cost = $10 / unit x 60 units = $600
Total cost = $72 + $115.20 + $600 = $787.20

Productivity = Revenue / Total cost

= 2325/ 787.20 = 2.953

Productivity = Revenue / Total cost

= 2325/ 787.20 = 2.953

Increase in productivity associated with process improvement = [(Productivity in new process

– Productivity in Old process) / Productivity in old process] x 100
= ( 2.953 – 1.666)/1.666 x 100
= 77.25 %
5(c)

Items Sales Labour Material Overhead Total

Price Cost Cost Cost
t r=0.2 x 5 L=t x r M H=0.2 x 5 T=L+M+O
Kruggerand 1500 1.00 300 300 2 300 602
Flat Screen 250 0.25 50 3 1 50 64
TV
$200 cash 200 0.05 40 2 45 40 87
Lava Lamp 5 0.15 1 0 25 1 26
Rolex 180 0.10 36 4 1 36 41
Watch
TOTAL 2135 1.55 427 318 74 427 819

Labour Productivity

Output 2135
No. of Labour 3
Productivity 711.67 /labour

Multifactor Productivity

Output Value 2135

Input Cost 819
Productivity 261%