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Calculating the desired productivity ratios

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Alyssa's Custom Cakes currently sells 5 birthday, 2 wedding and 3 specialty cakes each month for $50, $150 and $100 each respectively. The cost of labor is $50 per hour including benefits. It takes 90 minutes to produce a birthday cake, 240 minutes to produce a wedding cake and 60 minutes to produce a specialty cake. Alyssa's current multifactor productivity ration is 1.25

a.) Assuming each cake costs the same to make, what is the average cost to produce a cake?
b.) Calculate Alyssa's labor productivity ration in dollars per hour for each type of cake
c.) Based solely on the labor productivity ration, which cake should Alyssa try to sell the most
d.) Based on your answer in part (a) is there a type of cake Alyssa should stop selling?

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Solution Preview

a.) Revenue from selling 5 birthday cakes=5*50=$250
Revenue from selling 2 wedding cakes=2*150=$300
Revenue from selling 3 specialty cakes=3*100=$300

Total output (Revenue)=250+300+300=850
Total cakes sold=5+3+2=10

Multifactor productivity=MFP=1.25

We know that MFP=Total output (Revenue)/Total input ...

Solution Summary

Solution describes the steps to calculate the desired productivity measures in the given case.

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Calculate the productivity ratios

You have a company that makes 30000 light bulbs per day with the following resources:

Labor : 250 hours per day@$15.00 per hour
Raw Material : 60000 pounds of glass per day @$0.50 per pound
Energy : $10000 per day
Capital : $3500 per day

1) What is the productivity per labor hour for the light bulbs you make?
2) What is the multifactor productivity for these bulbs?
3) What is percentage decrease in multifactor productivity if your energy bill doubles without cutting you production or changing any other inputs?

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