A company that makes shopping carts for supermarkets and other stores recently purchased somenew equipment that reduces the labor content of the jobs needed to produce the shopping carts.Prior to buying the new equipment, the company used five workers, who produced an average of80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With the newequipment, it was possible to transfer one of the workers to another department, and equipment costincreased by $10 per hour while output increased by four carts per hour.a. Compute labor productivity under each system. Use carts per worker per hour as the measure oflabor productivity.b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plusequipment) as the measure.c. Comment on the changes in productivity according to the two measures, and on which one youbelieve is the more pertinent for this situation.
A company that makes shopping carts for supermarkets and other stores recently purchased some
new equipment that reduces the labor content of the jobs needed to produce the shopping carts.
Prior to buying the new equipment, the company used five workers, who produced an average of
80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With the new
equipment, it was possible to transfer one of the workers to another department, and equipment cost
increased by $10 per hour while output increased by four carts per hour.
a. Compute labor productivity under each system. Use carts per worker per hour as the measure of
labor productivity.
b. Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus
equipment) as the measure.
c. Comment on the changes in productivity according to the two measures, and on which one you
believe is the more pertinent for this situation.
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