Wage and Quality Raw Cotton

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Answer all questions:

Question 1:

Mance Fraily, the Production Manager at Ralts Mills, can currently expect his operation to produce 1000 square yards of fabric for each ton of raw cotton. Each ton of raw cotton requires 5 labor hours to process. He believes that he can buy better quality raw cotton, which will enable him to produce 1200 square yards per ton of raw cotton with the same labor hours.

What will be the impact on productivity (measured in square yards per labor-hour) if he purchases the higher quality raw cotton?

Question 2:

The weekly output of a production process is shown below, together with data for labor and material inputs. The standard inventory value of the output is RM125 per unit. Overhead is charged weekly at the rate of RM1500 plus .5 times direct labor cost. Assume a 40-hour week and an hourly wage of RM16. Material cost is RM10 per running foot.

What is the average multi-factor productivity for this process?

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Question 3:

A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are RM12/hour, and material input was previously RM16/unit. For the new process, material is now RM10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for RM31 each.

What increase in productivity is associated with the process improvement?
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