A local manufacturer of small animal feeds compiled the following input and output data over a

four-week period. The costs for labour was $ 20 per hour for regular time and $ 30 per hour for

overtime. Overtime was paid when someone worked more than 40 hours per week. Material

costs are $.45 per kilo. Calculate the multifactor productivity measures.

Week 1 2 3 4

Output (units) 4000 5500 6250 7000

Number of
5 5 6 8
Workers

Hours per Week

40 50 60 50
per Worker

Input Material
5000 6000 6500 7100
(kilos)

 Methods and Management

 Equipment and Technology

 Labour

Productivity is a global issue:

  Developing Economies - Low agricultural productivity inhibits manufacturing and

service sector growth due to the high demand for labour to meet day-to-day

needs

 Developed Economies – Low levels of investment in new technologies will limit

productivity and create competitive opportunities for those who are actually

willing to invest

 A local pet food manufacturer starts to make 150 batches of dog food. However, only

70% of these batches were good when produced. The defective batches were put in

holding tanks and after testing it was found that only a third of them could be reworked

into saleable product.

 What was the yield?

 Yield = (INS)(% Good) + (INS)(1-% Good)(Proportion Reworked Successfully)

 = 150(.7) + 150(1 - .7)(1/3)

 = 120

 Therefore the total yield = 120/150 = 80%

 * INS - Initial Number Started

In this case, consider a machine shop that manufactures rocket engines. The engines must go

through four stages of production until there are ready to be installed on planes. The schedule

calls for 180 engines during the current production run

Product Yield = INS*%G1*%G2*%G3*%G4

= 180*.85*.90*.94*.88

= 113.9 ~ 114

So how many engines would you need to start building if you intend on meeting a specific yield

requirement to meet a new government contract?

(This is simply an extension of our discussion on productivity and yield)

Using the same example, if it cost $ 245 to produce one batch of dog food and $ 80 to rework

defective batches into saleable dog food, then what is the cost per batch sold?

Cost per Unit = the sum of direct costs (from the initial run) + costs to rework product

= (Cd*INS) + (Cr*R)

Yield

= ($245*150) + ($80*15)
 120

= $316.25