Fall 2017 POMG2710

Productivity Problems
Problem 1:
John Lucy makes wooden boxes in which to ship motorcycles. John and his three
employees invested a total of 40 hours per day making the 120 boxes.
1. What is their productivity?
2. John & his employees decided to redesign the process to improve
efficiency. If they can increase the rate to 125 boxes per day, what will be
their new productivity?
3. What will their percentage change in productivity be?

Problem 2:
An operation in a company has 20% scrap rate. As a result 800 units are produced in a
ten-hour day. The units are produced by 4 workers who use 2 kilos of raw materials per
unit. Workers are paid 5 Omani Rials per hour; raw material cost is 500 baiza per kilo.
The overhead cost is 60 Omani Rials.
1. Calculate the labor productivity (per worker, per labor hour, per Rial)
2. Calculate the overall productivity (labor +raw material + overhead)

Problem 3:
Refer to problem 1, the company wants to implement a new production system to reduce
the scrap rate. There are two alternatives to do so:
1. Alternative 1: Reduce the scrap rate to 0%. To do so, the overhead cost
will increase by 50% but the workers will be decreased to 3 workers.
2. Alternative 2: Reduce the scrap rate to 5% where the overhead cost will
increase only to 70 Omani Rials. However, the raw material cost per kilo
will increase to 750 baiza per kilo. The number of workers will remain as
4 workers.
3. Which one of the three alternatives would you recommend MFP?

Problem 4:
Refer to problems 1 and 2. If the product price changes according to the production
system, where the price per unit under the current system is 10 R.O and under new
system as follows: alternative 1 (13 R.O) and alternative 2 (12 R.O.) which system will
be more productive?

Problem 5:
Lake Charles Sea food makes 250 wooden packing boxes for fresh sea food per shift,
working in two 10-hours shifts. Due to increase in demand, plant manager have decided
to operate three 8-hours shift instead. After the change, the plant is now able to produce
650boxes per day.
4. Calculate productivity before the change.
5. What is the percentage change in productivity on both systems.
Fall 2017 POMG2710

Problem 6:
Eric Johnson makes billiard balls in his New England plant. With recent increases in his
costs, he has a new found interest in efficiency. Eric is interested in determining the
productivity of his organization. He has the following data representing a month from last
year and an equivalent month this year: Show the productivity change for each category
(partial productivity).

Last year Now

Units produced 1000 1000
Labor (hours) 300 275
Resin (pounds) 50 45
Capital invested ($) 10000 11000
Energy (BTU) 3,000 2,850

Problem 7:
Eric Johnson (using data from problem 6) determines his costs to be as follows: Labor
$10 per hour, Resin $5 per pound, Capital 1% per month of investment and Energy $0.5
per BTU. Show the productivity change, for one month last year versus one month this
year, on a multifactor basis with dollars as the common denominator. Assume price as
10.

Problem 8:
A company recently bought new equipment that reduces the labor content to manufacture
shopping cart. Prior to buying this new equipment the company used 5 workers who
produced an average of 80 carts per hour. In the old system, workers received $10 per
hour and machine cost was $40 per hour. With the new equipment, it was possible to
transfer a worker to another department, and equipment cost increased by $10 per hour
while output increased by four carts per hour.
1. Compute labor productivity under each system. Use carts per worker hour as
measure of labor productivity.
2. Compute multifactor productivity. (Labor + Equipment)