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Productivity Changes: The Dulac Box Case

The Dulac Box plant produces wooden packaging boxes to be used in the local seafood industry. Current operations allow the company to make 500 boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some moderate changes in equipment, and conducted appropriate job training, so that production levels have risen to 300 boxes per shift. Labor costs average $10 per hour for each of the 5 full-time workers on each shift. Capital costs were previously $3000 per day, and rose to $3200 per day with the equipment modifications. Energy costs were unchanged by the modifications, at $400 per day.

(a) What is the firm's multifactor productivity before and after the changes?
(b) Why is it important to be aware of the productivity changes?
(c) Analyze implications of changes in the parameters of the productivity calculation.
(d) Evaluate application of productivity concept in terms of the firm's business operational goals and requirements.

Solution Preview

(a) Before - Multifactor Productivity
Daily Production x Labor Cost per Unit / (Daily Labor Cost + Capital Daily + Energy Daily)
(500 Ã?- 1.6) Ã?· (800 + 3000 + 400) = 0.19047619047

After - Multifactor Productivity
Daily Production x Labor Cost per Unit / (Daily Labor Cost + Capital Daily + Energy Daily)
(600 Ã?- 1.33) Ã?· (800 + 3200 + 400) = 0.18136363636

(b) In the above case, making ...

Solution Summary

Multifactor productivity before and after changes. What is important in productivity changes. Analysis of changes in productivity calculations. Productivity concept.

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