QUESTIONS 3 What would be the amount of additional expense on equipment that would make productivity of the two systems

equal? Current Equipment Labor: (30x8hrs)x(2shfts)x5 2400hrs.@$10 = $24000 Capital: 0 Energy: (1000units@$10) = $10,000 Total cost: $34,000 New Equipment Labor: (30x8hrs)x(2shfts)x5 2400hrs.@$10 =$24000 Capital: = $10,000 Energy: = (500units@$10) = $5,000 Total cost: $39,000

1) Multifactor productivity of current equipment: = 120,000pounds (1500x16hrs.x5)/$34,000 = 3.5294pounds/dollar 2) Multifactor productivity of New equipment: = 160,000pounds (2000x16hrs.x5)/$39,000 =4.1026pounds/dollar Using current productivity (3.5294) as the base, the increase will be 0.1624. That is (3.52944.1026)/3.5294 = 16.24% increase. 16.24% x $10,000 =$ 1624 (additional expense on equipment to make productivity of the two system equal)

QUESTION 4 If the energy costs increase in the future, it will drive the rise in the production costs as well.

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