Martin House Laboratories operates medical laboratories throughout North America. Martin House is currently studying three of its laboratories, which use differing brands of equipment, running at different speeds and requiring differ- ent lab materials to operate. Martin House has collected the following informa- tion on each of the three facilities last month:

Martin House estimates the lab tech labor cost to be \($25\) per hour at the Sulfur Springs and Niagara labs, and \($30\) per hour at the Queens lab. In addition, Martin House has determined that \($30,000\) in monthly corporate overhead should be divided among the three laboratories.

Questions

1. What is the productivity per lab tech labor hour for each of the three laboratories? Which is the most productive according to this measure?

2. Calculate multi-factor productivity for each of the three laboratories, including the monthly corporate overhead.

3. The lab manager at Sulfur Springs lab complains that the corporate overhead allo- cation scheme is unfair, because Sulfur Springs is a much smaller facility focused on fewer testing services, and thus requires very little support from Martin House headquarters when compared to the Queens and Niagara labs. Corporate man- agement has considered this observation and agrees: Sulfur Springs should be assigned only half the overhead burden that the two larger labs are assigned, which means it should receive 20% of the overall amount while the other two labs receive 40%. Will this change the multifactor productivity ranking among the three labs? If so, how?

Transcribed Image Text:

Tests Completed Lab Tech Material Other Operating Labor Hours Costs ($) Expenses ($) Queens lab 10,000 400 $7,500 $3,000 Sulfur Springs lab 5,000 275 1,200 1,000 Niagara lab 6,000 500 815 1,000