Question

Five workers use 1,000 grams of raw materials to create 250 custom boxes. The workers are paid $160 per day for an eight-hour shift. The raw materials cost $4.5 per gram. Also, the overhead rate is 3.5 times the labor cost. What is the multifactor productivity expressed as units of output per dollar of input

Answer 1

Multifactor productivity = 0.03.

Step-by-step explanation:

a) Data and Calculations:

Number of workers involved in the production = 5

Number of hours worked per day by the 5 workers = 5 * 8 = 40 hours

Labor cost = 5 * $160 = $800

Quantity of raw materials used = 1,000 grams

Cost of raw materials = $4.5 * 1,000 = $4,500

Overhead cost = 3.5 * $160 * 5 = $2,800

Total input cost = $8,100 ($800 + 4,500 + 2,500)

Multifactor productivity = Output/total input cost = 250/$8,100 = 0.03

b) The multifactor productivity (MFP) is a measure of the output expressed as a per unit of the combined inputs (Labor + Capital + Land + Intermediate Inputs). The MFP indicates the overall production efficiency of an industry, sector, or economy. The multifactor productivity is a more comprehensive measure of productivity than the single labor productivity or other single-factor productivity measures.