Chapter 1

Problem set 2

1. Long Beach Bank employs three officers, each working eight hours per day. Each
officer processes an average of five loans per day. The bank’s payroll cost for the officers
is $820 per day. And there is a daily overhead expense of $500. The bank has just
purchased new computer software that should enable each officer to process eight loans
per day, although the overhead expense will increase to $550. Evaluate the change in
labor and multifactor productivity before and after implementation of the new computer
software.

Labor productivity (old)

3 officers x 5 loans per day 15 loans per day

= 3 x 8 hours  24 labor hrs  24 hours
 .625 loan per labor  hour

Labor productivity (new)

=
3 officers x 8 loans per day 24 loans per day
  1.00 loan per labor  hour
3 x 8 hours  24 labor hrs 24 hours

Multifactor productivity (old)

3 officers x 5 loans per day 15 loans per day

= $820 per day  $500 / day  $1320
 .0113 loans per dollar

Multifactor productivity (new)

3 officers x 8 loans per day 24 loans per day

= $820 per day  $550 / day  $1370
 .0175 loans per dollar

The change in labor productivity is from 0.625 to 1.00 per labor hour. This results in an
1.00
increase of  1.6 , or an increase of 60%, while the change in multifactor
.625
productivity is from 0.0113 to .0175 loans per dollar. This results in an increase of
.0175
 1.55 , or an increase of 55%.
.0113