The Big Black Bird Company (BBBC) has a large order for special plastic-lined military uniforms to be used in an urgent military operation. Working the normal two shifts of 40 hours each per week, the BBBC production process usually produces 2,500 uniforms per week at a standard cost of $120 each. Seventy employees work the first shift and 30 the second. The contract price is $200 per uniform. Because of the urgent need, BBBC has authorized around-the-clock production, six days a week. When each of the two shifts works 72 hours per week, production increases to 4000 uniforms per week, but at a total cost of $144 each.
a. Did the labor productivity ratio increase, decrease, or remain the same? If it changed, by what percent did it change?
b. Did the multi-factor productivity ratio increase, decrease, or remain the same? If it changed, by what percent did it change?
c. Did the weekly profits increase, decrease, or remain the same?
d. Is it worth it?
a. Labor Productivity:
Normal Value of output 2500 x $200 = $500,000
Input = 80 labor force hours
Labor productivity $500,000/80 hr = $6,250/hr
Around-Clock Value of output 4000 x $200 = $800,000
Input = 144 labor force ...
The Solution determines labor productivity, multi-factor productivity, and profits of a military uniform company.