BUSI 2603U Operations Management Tutorial Worksheet (Productivity)

outputs
Single Factor: any single input Note: Single factor can be any single input

outputs
Multi Factor: any input combo Note: Multi-factor can be a combination of any number of

specified inputs, but all must be in the same unit of

measure

outputs New productivityOld productivity

Total Factor: all inputs Productivity Change = Old productivity

x 100%

Question 1:

A firm cleans chemical tank cars in the Bay St. Louis area. With standard equipment, the firm
typically cleaned 70 chemical tank cars per month. They utilized 10 gallons of solvent, and two
employees worked 20 days per month, 8 hours a day.

The company decided to switch to a larger cleaning machine. Last April, they cleaned 60 tank
cars in only 15 days. They utilized 12 gallons of solvent, and the two employees worked 6 hours
a day.

If labor costs 10$/hour and solvent costs 25$ a gallon, has the firm improved its total
productivity during the past year? By how much?
BUSI 2603U Operations Management Tutorial Worksheet (Productivity)

Question 2:

Dolly Doolittle has a new home business making fridge magnets. She works 12 hours to produce
240 magnets a day. Materials cost $3.50 per magnet. Her overhead costs $24.00 a day (energy,
delivery, etc.).She pays herself $10.00 an hour.

a) What is Dollys total productivity?

b) Dolly thinks she can increase her productivity to 360 magnets a day if she uses new
materials. She is on her way to negotiate a cost for these materials with the supplier. What
is the most she can pay for these new materials before her total productivity drops?
BUSI 2603U Operations Management Tutorial Worksheet (Productivity)

Question 3

Ewe-PS is evaluating the productivity of its mail processing centres. The centres differ in the
degree of automation, the type of work that can be performed, and the skill of the workers.

1 2 3
Pieces processed per hour 1000 2000 3000
# of workers per hour 10 5 2
Hourly wage rate $20.50 $25.00 $27.00
Overhead cost per hour $10.00 $25.00 $50.00

a) Calculate the total productivity for each centre. Which is most productive?
b) Workers in Centre 1 are scheduled to receive a 10% pay raise next month. What is the
change in productivity? Considering the impact on productivity at this centre, make a
recommendation to management about how to alter operations at Centre 1.
c) A new processing machine is available for Centre 3, that would increase the output to
5000 pieces an hour, at an additional overhead rate of $30 per hour. Should Ewe-PS
install the new processing machine?