Question

EzBike puts together bikes with parts they purchase from a variety of suppliers. Recently they purchased some new equipment that reduced the labor needed to put these bikes together. Prior to buying the new equipment the company used 5 workers, who produced an average of 80 bikes 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, resulting in equipment cost increasing by $10 per hour, and output increasing by 4 bikes per hour.

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

Answer 1

Labor productivity initially was 16 bikes per worker per hour with 5 workers. After new equipment was introduced and one worker was reassigned, productivity increased to 21 bikes per worker per hour with 4 workers.

Step-by-step explanation:

To compute labor productivity for EzBike under each system, we use the measure of bikes per worker per hour. Initially, with 5 workers producing an average of 80 bikes per hour, the labor productivity is 80 bikes divided by 5 workers, equating to 16 bikes per worker per hour. After purchasing the new equipment, labor productivity increases: there are now 4 workers producing 84 bikes per hour, resulting in 21 bikes per worker per hour.

Therefore, the introduction of the new equipment not only reduced the labor needed but also increased productivity.