Q1. Brown’s, a local bakery, is worried about increased costs—particularly energy.

Last
year’s records can provide a fairly good estimate of the parameters for this year. Wende
Brown, the owner, does not believe things have changed much, but she did invest an
additional $3,000 for modifications to the bakery’s ovens to make them more energy
efficient. The modifications were supposed to make the ovens at least 15% more efficient.
Brown has asked you to check the energy savings of the new ovens and also to look over
other measures of the bakery’s productivity to see if the modifications were beneficial. You
have the following data to work with:

Last Year Now

Production (Dozen) 1500 1500
Labor (hours) 350 325
Capacity Investment ($) 15000 18000
Energy (BTU) 3000 2750

 Productivity of capital did drop; labor productivity increased as did

energy, but by less than the anticipated 1.5%.
 Productivity of capital did not drop; labor productivity increased as did
energy, but by more than the anticipated 15%.
 Productivity of capital did drop; labor productivity decreased as
did energy, but by more than the anticipated 15%.
 Productivity of capital did drop; labor productivity increased as did
energy, but by less than the anticipated 15%.
Powered by Qualtrics

Q2. Lake Charles Seafood makes 500 wooden packing boxes for fresh seafood per day,
working in two 10-hour shifts. Due to increased demand, plant managers have decided to
operate three 8-hour shifts instead. The plant is now able to produce 650 boxes per day.
1. Calculate the company’s productivity before the change in work rules and after the
change.
2. What is the percentage increase in productivity?
3. If production is increased to 700 boxes per day, what is the new productivity?
 Before- 27.08 boxes/hr; After - 25 boxes/hr; Decrease in productivity -
.83%; New labor productivity 23.17 boxes/hr
 Before & After - 27.08 boxes/hr; no change in productivity
 Before and After - 25 boxes/hr; No change in productivity
 Before- 25 boxes/hr; After - 27.08 boxes/hr; Increase in
productivity - 8.3%; New labor productivity 29.17 boxes/hr
Q3. Mr Store who runs his photocopy business working 8 hours per day process 100
scripts. He estimates his labour cost to be € 9 per hour. Also he has estimated that the
total material cost for each script is approximately € 2; while the daily expenses are €28.
Calculate the multifactor productivity. In an effort to increase the rate of the photocopy
 process to 150 scripts, he decides to change the quality of ink thus raising the material
cost to € 2.5 per day. Is the new productivity better than before? If Mr Store would like to
increase the photocopy process to 150 scripts without sacrificing the initial multifactor
productivity, by what amount has the material costs to be increased?
 there is an increase in multi-factor productivity; the material cost
will increase by €0.34
 there is a drop in multi-factor productivity; the material cost will
decrease by €0.34
 there is a drop in multi-factor productivity; the material cost will increase
by €0.34
 there is no change in multi-factor productivity and the material cost

Q4. As part of a study for the Department of Labor Statistics, you are assigned the task
of evaluating the improvement in the productivity of small businesses. Data for one of
the small businesses you are to evaluate are shown at right. The data are the monthly
average of last year and the monthly average this
year. Determine the multifactor productivity with dollars as the common denominator for:
a) Last year.
b) This year.
c) Then determine the percentage change in productivity for the monthly average last
year versus the monthly average this year on a multifactor basis.

 Labor: $8 per hour

 Capital: 0.83% per month of investment
 Energy: $0.60 per BTU

 Last Year .341 doz/$; This year 0.341 doz/$; Percent change 0%
 Last Year .341 doz/$; This year 0.317 doz/$; Percent change 7.6%
 Last Year .317 doz/$; This year 0.341 doz/$; Percent change 7.6%
 Last Year .317 doz/$; This year 0.341 doz/$; Percent change .76%
Powered by Qualtrics