A hamburger factory produces 60,000 hamburgers each week. The equipment used costs $10,000 and will remain productive for 4 years. The labor cost per year is $13,500.
a. What is the productivity measure of “units of output per dollar of input” averaged over the four-year period?
b. We have the option of $13,000 equipment, with an operating life of 5 years. It would reduce labor costs to $11,000 per year. Should we consider purchasing this equipment (using productivity arguments alone)?