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Government is planning to invest in a new computer system that will enable faster background checks for passport applicants. Currently, a staff of 18 works for 8 hours per day at a payroll cost of $21 per hour per person. This facility incurs $1500 in overhead costs per day and processes an average of 65 applications per day. The new computer system will allow processing of 90 applications per day. The staff, the hourly labor cost per person, and the working hours will remain the same. However, the overhead cost per day will go up to $2100. Compute the multifactor productivity before and after adoption of the new system. NOTE: SHOW ALL YOUR WORK.
a) Explain clearly how multifactor productivity should be measured at this facility. What are the output(s)? What are the input(s)? Provide the exact formula for multifactor productivity.
b) Use the formula you presented in part (a) to answer this question: What is the expected percentage change in multifactor productivity if the government purchases the new system?
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