Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 45% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes 1,500 loaves per month. The pay will be $88 per hour for employees and each employee works 160 hours per month. Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $150 per month, but he will achieve the same new output (an increase to 2,175.00) as the change in labor hours. a) Current productivity for 640 work hours = nothing loaves/dollar (round your response to three decimal places). If Charles chooses to increase the number of work hours to 928 in order to employ the new oven loading technique, then the productivity is = nothing loaves/dollar (round your response to three decimal places). b) If Charles instead chooses to purchase a new blender (while holding labor constant at 640 hours at $88 per hour), then the productivity is = nothing loaves/dollar (round your response to three decimal places). c) By adding manpower, the percentage increase in productivity is nothing% (enter your response as a percentage rounded to two decimal places and include a minus sign if necessary). By purchasing a new blender (while holding labor constant at 640 hours at $88 per hour), the percentage increase in productivity is ___% (enter your response as a percentage rounded to two decimal places and include a minus sign if necessary).
Solved: Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent
Expert Answer
Answer A:- Current Productivity = Current Output / Labor hours = 1500/640 = 2.344
With an increase in labor:-
Output = (1500*1.45) = 2175
Labor hours= 928
Labor productivity = output / labor hours
Labor Productivity = 2175 / 928 = 2.344
Change in productivity = New Labor Productivity – Previous Labor Productivity = 2.344 – 2.344 = 0
No Change in productivity.
Answer B:- With an increase in investment
Output = 2175
Labor Hours = 640
Current Productivity = 2175 / 640 = 3.4
% change in productivity = (3.4 – 2.344)/2.344 * 100
% change in productivity = 45%
