Answer:
(a) 2.5 tires per labor hour
(b) 0.025 tires per dollar
(c) Increases by 2.4%.
Explanation:
(a) Labor productivity per labor-hour:
= Output ÷ Input
= 1,000 per day ÷ 400 hours per day
= 2.5 tires per labor hour
(b) Cost of labor input:
= 400 hours per day × $12.50 per hour
= $5,000 per day
Cost of raw material:
= 20,000 pounds per day × $1 per pound
= $20,000 per day
Cost of energy input = $5,000 per day
Cost of capital input = $10,000 per day
Total input cost per day:
= Cost of labor input + Cost of raw material + Cost of energy input + Cost of capital input
= $5,000 + $20,000 + $5,000 + $10,000
= $40,000
Hence,
Multifactor productivity:
= Output ÷ input
= 1,000 tires ÷ $40,000
= 0.025 tires per dollar
(c) New energy input:
= Current energy input - Reduction in bill
= $5,000 - $1,000
= $4,000
All the other inputs remains constant,
Therefore,
New input per day:
= Cost of labor input + Cost of raw material + Cost of new energy input + Cost of capital input
= $5,000 + $20,000 + $4,000 + $10,000
= $39,000
New multi-factor productivity:
= Output ÷ New input
= 1,000 tires ÷ $39,000
= 0.0256 tires per dollar
Percentage change in multi-factor productivity:
= (New multifactor productivity - Previous multifactor productivity) ÷ previous multifactor productivity
= (0.0256 - 0.025) ÷ 0.025
= 0.024 or 2.4%
Hence, the multifactor productivity increases by 2.4%.
