Farel Nanda Rosya

29123227

MINI CASE 1: PARTIAL MEASURE/SINGLE PRODUCTIVITY

Modern Lumber, Inc., Art Binley, president and producer of apple crates sold to growers, has been
able, with his current equipment, to produce 240 crates per 100 logs. He currently purchases 100
logs per day, and each log requires 3 labor-hours to process. He believes that he can hire a
professional buyer who can buy a better-quality log at the same cost. If this is the case, he can
increase his production to 260 crates per 100 logs. His labor-hours will increase by 8 hours per
day. What will be the impact on productivity (measured in crates per labor-hour) if the buyer is
hired?

ANSWER:

To determine the impact on productivity if the buyer is hired, we need to compare the current
productivity with the projected productivity after hiring the buyer.

Current Productivity:

• Crates produced per day: 240 crates

• Labor-hours per day: 100 logs * 3 labor-hours/log = 300 labor-hours
• Productivity: 240 crates / 300 labor-hours = 0.8 crates per labor-hour

Projected Productivity with Buyer:

• Crates produced per day: 260 crates

• Labor-hours per day: 300 labor-hours + 8 labor-hours = 308 labor-hours
• Productivity: 260 crates / 308 labor-hours = 0.844 crates per labor-hour

Impact on Productivity:

• Productivity increase: 0.844 crates per labor-hour - 0.8 crates per labor-hour = 0.044 crates
per labor-hour
• Percentage increase: (0.044 crates per labor-hour / 0.8 crates per labor-hour) * 100% =
5.5%

Therefore, hiring the buyer would result in a 5.5% increase in productivity, measured in crates per
labor-hour.
MINI CASE 2: MULTIFACTOR MEASURE/MULTIPLE PRODUCTIVITY

Art Binley has decided to look at his productivity from a multifactor (total factor productivity)
perspective (refer to Solved Problem Mini Case 1). To do so, he has determined his labor, capital,
energy, and material usage and decided to use dollars as the common denominator. His total labor-
hours are now 300 per day and will increase to 308 per day. His capital and energy costs will
remain constant at $350 and $150 per day, respectively. Material costs for the 100 logs per day are
$1,000 and will remain the same. Because he pays an average of $10 per hour (with fringes), Help
Binley determines his productivity increase

ANSWER:

To calculate the total factor productivity (TFP) increase, we need to compare the current TFP with
the projected TFP after hiring the buyer.

Current TFP:

• Output: 240 crates

• Total input cost: (300 labor-hours * $10/labor-hour) + $350 + $150 + $1000 = $4,850
• TFP: 240 crates / $4,850 = 0.05 crates per dollar

Projected TFP with Buyer:

• Output: 260 crates

• Total input cost: (308 labor-hours * $10/labor-hour) + $350 + $150 + $1000 = $4,930
• TFP: 260 crates / $4,930 = 0.052 crates per dollar

TFP Increase:

• TFP increase: 0.052 crates per dollar - 0.05 crates per dollar = 0.002 crates per dollar
• Percentage increase: (0.002 crates per dollar / 0.05 crates per dollar) * 100% = 4%

Therefore, hiring the buyer would result in a 4% increase in total factor productivity.