A production manager of a bakery, is preparing her quarterly report, which is to include a productivity analysis for her department. The following production data is prepared by her operation analyst (Table 1).
Table 1: Bakery production data
Items Quarter 1 Quarter 2
Production (dozen) 3000 3000
Raw material used (kgs) 1000 900
Labour hours 700 650
Capital invested ($) 40,000 50,000
Energy (BTU) 6000 5500
The manager knew that her labour cost per hour had increased from an average of $12 per hour (in quarter 1) to an average of $14 per hour (in quarter 2), primarily due to a move by management to become more competitive with a new company that had just opened a plant in the area. She also knew that her average cost per kilogram of raw material had increased from $3.20 (in quarter 1) to $3.60 (in quarter 2). The price of evergy was $1.25 per BTU (in quarter 1) and $1.00 (in quarter 2). She was concerned about the accounting procedures that increased her capital cost from $40,000 (in quarter 1) to $50,000 (in quarter 2), but earlier discussions with her boss suggested that there was an investment of $10m000 for modifications of the bakery's oven to make them more energy efficient. The operations manager wondered if her productivity had increased at all. She called the operation analyst into the office and conveyed the above information toy him and asked him to prepare this part of the report. The cost of capital per quarter is 5%.[1 dozen=12 units]
a. Calculate the labour productivity (in units per hour) and percentage change in labour productivity.
b. Calculate energy productivity (in units per BTU) and percentage change in energy productivity (up or down).
c. Calculate multifactor productivity and percentage change in multifactor productivity (up or down)
d. If the product sales for $18 per unit in quarter 1 and $21 per unit in quarter 2, did profit increase, decrease or remain the same?
e. The manager's expectation for the bakery is a quarterly multifactor productivity increase of 5%. Did she reach this goal? If she did not, by what percentage must energy use (in BTU) be reduced to achieve a 5% improvement in multifactor productivity?