Question
(b) Mohammed Murphy produces apple crates sold to growers. With his current equipment he has been able to produce 240 crates per 100 logs.
(b) Mohammed Murphy produces apple crates sold to growers. With his current equipment he has been able to produce 240 crates per 100 logs. He currently purchases 100 logs per day and each log requires 3 labour hours to process. He believes 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 and his labour hours will increase by 8 hours per day. Other than labour costs outlined above, the other elements of cost are outlined in Table 1.1 Current System System with Professional Buyer Material Cost (E) per day 1,000 Capital Costs (e) per day 350 Energy Costs (E) per day 150 1,000 350 150 Table 1.1: Cost Data for Mohammed Murphy's company (b) Clearly stating the units of productivity measurement in each case, calculate: (i) By how much (in units of productivity) the labour productivity will change if the buyer is hired (2 marks) (ii) The multi-factor productivity for the current and new system (4 marks) (iii) The percentage change in multi-factor productivity if the professional buyer is hired (3 marks) (b) Mohammed Murphy produces apple crates sold to growers. With his current equipment he has been able to produce 240 crates per 100 logs. He currently purchases 100 logs per day and each log requires 3 labour hours to process. He believes 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 and his labour hours will increase by 8 hours per day. Other than labour costs outlined above, the other elements of cost are outlined in Table 1.1 Current System System with Professional Buyer Material Cost (E) per day 1,000 Capital Costs (e) per day 350 Energy Costs (E) per day 150 1,000 350 150 Table 1.1: Cost Data for Mohammed Murphy's company (b) Clearly stating the units of productivity measurement in each case, calculate: (i) By how much (in units of productivity) the labour productivity will change if the buyer is hired (2 marks) (ii) The multi-factor productivity for the current and new system (4 marks) (iii) The percentage change in multi-factor productivity if the professional buyer is hired (3 marks)
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