Running head: ASSIGNMENT 1 – CHAPTER 2 1

Discussions

1. List the key ways that organizations compete.

Business organizations compete with one another in a variety of ways. Key among these
ways are price, quality, product differentiation, flexibility, and delivery time.

2. What is the Balanced Scorecard and how is it useful?

Balance scorecard is a strategic planning and management system that is used extensively in
business and industry, government, and nonprofit organizations worldwide to align business
activities to the vision and strategy of the organization, improve internal and external
communications, and monitor organization performance against strategic goals. It is useful
because it increase creativity, aligns KPIs with strategy, provides comprehensive pictures,
and provides a unique competitive advantage.

Problems

1. Compute the multifactor productivity measure for each of the weeks shown for
production of chocolate bars. What do the productivity figures suggest? Assume 40-hour
weeks and an hourly wage of $12. Overhead is 1.5 times weekly labor cost. Material cost
is $6 per pound.

Overhead
Worker cost Materials Total MFP
Output cost
Week cost cost
(units) 12*40

1 30,000 2880 4320 2700 9900 3.03

2 33,600 3360 5040 2820 11220 2.99

3 32,200 3360 5040 2760 11160 2.89

4 35,400 3840 5740 2880 12480 2.84

Week 1-MFP=output (units)/(labor+materials+overhead)=30000/9900= 3.03 unit per dollar input

Week 1- 12*40*6 =2880= worker cost

Week 1- 12*40*6 =2880* 1.5=4320= overhead cost

Week 1- 450*6 = 2700=material cost

Week 1- 2880+4320+2700=9900 total cost

Assignment 1 – Chapter 2 2

Multi-factor productivity dropped steadily from a high of 3.03 to about 2.84

3. 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 $10 per hour,
and machine cost was $40 per hour. With the new equipment, it was possible to transfer
one of the workers to another department, and equipment cost increased by $10 per hour
while output increased by four carts per hour.

a. Compute labor productivity under each system. Use carts per worker per hour as the
measure of labor productivity.

Before: 80 ÷ 5 = 16 carts per worker per hour.

After: 84 ÷ 4 = 21 carts per worker per hour.

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

Before: $10 x 5 = $50 + $40 = $90; hence 80 ÷ $90 = .89 carts/$1.

After: $10 x 4 = $40 + $50 = $90; hence 84 ÷ $90 = .93 carts/$1.

c. Comment on the changes in productivity according to the two measures, and on which
one you believe is the more pertinent for this situation.

Labor productivity increased by 31% (5/16).

Multifactor productivity increased by 4.5% (.04/.89).