Reference no: EM133184565

Question - KAYA KOTO is a company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used five workers, who produced an average of 80 carts per hour. Workers receive P50 per hour, and machine cost was P100 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by P100 per hour while output increased by 10% carts per hour.

1. Compute labor productivity under each system (before and after the purchase of new equipment). Use carts per worker per hour as the measure of labor productivity.

2. Compute the multifactor productivity under each system. Use carts per peso cost (labor plus equipment) as the measure.

3. Based on multifactor productivity, which one of the options is more cost efficient?

What if, instead of just only one worker, it was further analyzed that KAYA KO TO can actually transfer one more worker to another department because of this new equipment.

4. Compute the new multifactor productivity using carts per peso cost (labor plus equipment) as the measure.

5. Based on new multifactor productivity, which one of the options is more cost efficient?