Question & Answer: Productivity can be measured in a variety of ways, such as by labor, capital, energy…..

2. Productivity can be measured in a variety of ways, such as by labor, capital, energy, and material usage. At Modern Lumber Inc.; Art Binley, President and producer of apple crates sold to growers, has been able to produce 240 crates per 100 logs with his current equipment. 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?

Productivity can be measured in a variety of ways, such as by labor, capital, energy, and material usage. At Modern Lumber Inc.: Art Binley, President and producer of apple crates sold to growers, has been able to produce 240 crates per 100 logs with his current equipment. 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?

Expert Answer

Answer

C	Crates	240	From	100	logs
P	Purchases	100	logs per day
E	Each log takes	3	Labor hours
D=E*P	Daily labor hours	300
Pro=C/D	So Crates/labour hours	0.8
New Scenario
C1	Crates	260	From	100	logs
P	Purchases	100	logs per day
D1=D+8	Daily labor hours	308
Pro1=C1/D1	So Crates/labour hours	0.8442

(Pro1-Pro)/Pro1	Change in productivity	5.52%

As the productivity increase is positive, so the buyer must be hired.

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