Probs Productivity

26 PART 1 CREATING VALUE THROUGH OPERATIONS MANAGEMENT
11. You are designing a grocery delivery business. Via the In- with two major food stores in the area. What should be
ternet, your company will offer staples and frozen foods your competitive priorities and what capabilities do you
in a large metropolitan area and then deliver them within want to develop in your core and support processes?
a customer-defined window of time. You plan to partner
Problems
The OM Explorer and POM for Windows software is available 3. CD players are produced on an automated assembly line
to all students using the 10th edition of this textbook. Go to process. The standard cost of CD players is $150 per unit
www.pearsonhighered.com/krajewski to download these (labor, $30; materials, $70; and overhead, $50). The sales
computer packages. If you purchased MyOMLab, you also price is $300 per unit.
have access to Active Models software and significant help in a. To achieve a 10 percent multifactor productivity im-
doing the following problems. Check with your instructor on provement by reducing materials costs only, by what
how best to use these resources. In many cases, the instructor percentage must these costs be reduced?
wants you to understand how to do the calculations by hand.
At the least, the software provides a check on your calculations. b. To achieve a 10 percent multifactor productivity im-
When calculations are particularly complex and the goal is in- provement by reducing labor costs only, by what per-
terpreting the results in making decision, the software entirely centage must these costs be reduced?
replaces the manual calculations. c. To achieve a 10 percent multifactor productivity im-
1. (Refer to Solved Problem 1.) Coach Bjourn Toulouse led provement by reducing overhead costs only, by what
the Big Red Herrings to several disappointing football percentage must these costs be reduced?
seasons. Only better recruiting will return the Big Red 4. The output of a process is valued at $100 per unit. The cost
Herrings to winning form. Because of the current state of labor is $50 per hour including benefits. The accounting
of the program, Boehring University fans are unlikely department provided the following information about the
to support increases in the $192 season ticket price. process for the past four weeks:
Improved recruitment will increase overhead costs to
$30,000 per class section from the current $25,000 per Week 1 Week 2 Week 3 Week 4
class section. The university’s budget plan is to cover re-
cruitment costs by increasing the average class size to 75 Units Produced 1,124 1,310 1,092 981
students. Labor costs will increase to $6,500 per 3-credit
Labor ($) 12,735 14,842 10,603 9,526
course. Material costs will be about $25 per student for
each 3-credit course. Tuition will be $200 per semester Material ($) 21,041 24,523 20,442 18,364
credit, which is supplemented by state support of $100
per semester credit. Overhead ($) 8,992 10,480 8,736 7,848
a. What is the multifactor productivity ratio? Compared
to the result obtained in Solved Problem 1, did produc- a. Use the multifactor productivity ratio to see whether
tivity increase or decrease for the course process? recent process improvements had any effect and, if so,
when the effect was noticeable.
b. If instructors work an average of 20 hours per week for
16 weeks for each 3-credit class of 75 students, what is b. Has labor productivity changed? Use the labor produc-
the labor productivity ratio? tivity ratio to support your answer.
2. Suds and Duds Laundry washed and pressed the following 5. Alyssa’s Custom Cakes currently sells 5 birthday, 2 wed-
numbers of dress shirts per week. ding, and 3 specialty cakes each month for $50, $150, and
$100 each, respectively. The cost of labor is $50 per hour
including benefits. It takes 90 minutes to produce a birth-
Week Work Crew Total Hours Shirts
day cake, 240 minutes to produce a wedding cake, and
1 Sud and Dud 24 68 60 minutes to produce a specialty cake. Alyssa’s current
multifactor productivity ratio is 1.25.
2 Sud and Jud 46 130
a. Use the multifactor productivity ratio provided to
3 Sud, Dud, and Jud 62 152 calculate the average cost of the cakes produced.
4 Sud, Dud, and Jud 51 125 b. Calculate Alyssa’s labor productivity ratio in dollars per
hour for each type of cake.
5 Dud and Jud 45 131
c. Based solely on the labor productivity ratio, which cake
should Alyssa try to sell the most?
a. Calculate the labor productivity ratio for each week.
d. Based on your answer in part (a), is there a type of cake
b. Explain the labor productivity pattern exhibited by the Alyssa should stop selling?
data.

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26 PART 1 CREATING VALUE THROUGH OPERATIONS MANAGEMENT

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