a. A labor content is nothing but the total sum of all the process. There are 5 activity and each activity has some duration. Adding all the duration will provide the total labor content
Labor content = Activity 1 + Activity 2 + Activity 3 + Activity 4 + Activity 5
= 14 + 10 + 14 + 28 + 2
= 68 minutes
The labor content per customer is 68 minutes.
b) The average labor utilization is the key indicator of the effective overall performance or the process.
Server 1 can process (1 / 14) customer per min
Server 2 can process (1 / 10 + 14) = 1 / 24 customer per min
Server 3 can process (1 / 28 + 2) = 1 / 30 customer per min. Hence Server 3 will be bottleneck and the idle time.
Average labor utilization = Total labor content / (Total labor content + idle time)
= 68 / (68 + 30)
= 68 / 98
= 0.6938 = 69.38%
The average labor utilization is 69.38%
c) There are 3 servers, means there are 3 employees in the system
Wages = 3 x 15 = $45
Flow rate = 68 / 30
Direct labor cost = total wages / flow rate
= 45 / 2.26
= $19.91 per customer
The cost of direct labor per customer is $19.91
d) Given that there will be an extra employee, so the customer capacity would increase from 3 to 4
New direct labor cost = (15 x 3) / 4
The new direct cost would be $11.25
e) By reassigning Sever 3 will have the operating time of 28 mins and server 1 will have 16 mins
therefore, flow rate of server 3 would be 68 / 28 = 2.42
Total direct cost = 45 / 2.42
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