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# Labor productivity

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A union employer is able to produce a machined part for \$8.90 per unit and the cost of one (1) hour of union labor is \$26.70. If a non-union employer is able to pay their employees \$17.00 per hour and can produce the identical part with 30 minutes of labor, which supplier should you purchase the part from? If the higher cost employer were able to increase the labor productivity of their shop, what magnitude of increase (as a percent of current labor time) would be necessary to give them a cost advantage. Assume that the only cost associated with producing the product is the involved labor. For the second question, consider all other criteria unchanged.

https://brainmass.com/economics/macroeconomics/labor-productivity-53632

#### Solution Summary

The solution answers the question(s) below.

\$2.19

## Calculate the multiple factor productivity for the given service combinations.

The three person crew worked their way through the neighborhood, mowing lawns, edging, apply fertilizer and weed treatments where necessary and collecting all the clippings for use as mulch as part of their new green initiative. Their pricing scheme appears in Table A and the mix of orders and service costs appear in Table B (a clearer view can be seen in the attached excel file):

Table A: Price List:
SERVICE PRICE LABOR MATERIAL
Mow lawn \$70 1 hr \$3
Edge \$25 0.25 hr \$2
Fertilizer treatment \$130 0.25 hr \$40
Weed prevention \$80 0.25 hr \$25

Multiple services 5% discount times the number of services

Workers are paid at a rate of \$10 per hour, and overhead is charged at 120% (or 1.2 times) labor costs. For example, for a customer that gets both mowing and edging, their \$95 bill would be discounted for two services times 5% for a total of 10% off the \$95 straight charge for a cost of \$85.50. A customer receiving three services would get a 15% discount off their service bill. Labor hours shown in Table A are total hours for the three-person crew.

Table B: Orders Processed
SERVICE # Customers
Mow lawn & edge 6
Mow lawn, Edge, and fertilize 3
Mow lawn, Edge, and weed prevention treatment 2
Mow lawn & fertilize 2

1. Which of the following service combinations they are providing is their most productive from a Multi-factor perspective?
Select one:
a. Mow lawn and fertilize
b. Mow lawn and edge
c. Mow lawn, edge, and fertilize
d. Mow lawn, edge, and weed prevention treatment

2. What is the overall labor productivity (rounded to one decimal)
Select one:
a. 9.7
b. 10.0
c. 9.2
d. 9.5

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