Finance Problems

Problem 1

Chuck Sox makes wooden boxes in which to ship

motorcycles. Chuck and his three employees invest a total of 40

hours per day making the 120 boxes.

a) What is their productivity?

b) Chuck and his employees have discussed redesigning the process

to improve efficiency. If they can increase the rate to 125

per day, what will be their new productivity?

c) What will be their unit increase in productivity per hour?

d) What will be their percentage change in productivity?

Problem 2

Lillian Fok is president of Lakefront Manufacturing,

a producer of bicycle tires. Fok makes 1,000 tires per day with the

following resources:

Labor: 400 hours per day @ $12.50 per hour

Raw material: 20,000 pounds per day @ $1 per pound

Energy: $5,000 per day

Capital costs: $10,000 per day

a) What is the labor productivity per labor-hour for these tires at

Lakefront Manufacturing?

b) What is the multifactor productivity for these tires at

Lakefront Manufacturing?

c) What is the percent change in multifactor productivity if Fok

can reduce the energy bill by $1,000 per day without cutting

production or changing any other inputs?

Problem 3

Charles Lackey operates a bakery in Idaho Falls, Idaho.

Because of its excellent product and excellent location, demand has

increased by 25% 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. If the

bakery makes 1,500 loaves per month with a labor productivity of

2.344 loaves per labor-hour, how many workers will Lackey need to

add? (Hint: Each worker works 160 hours per month.)