A firm that makes kitchen cabinet doors recently purchased some new equipment that reduces the labour requirements (hours) of the jobs needed to produce the cabinet doors. Prior to buying the new equipment, the manufacturer used five workers, each working in one 8-hour shift, who produced an average of 400 cabinet doors per day. Labour cost was $15 per hour and machine cost was $50 per hour. With the new equipment, it was possible to transfer one of the workers to another department. Machine cost has increased by $10 per hour while output increased by 20% (or by 80 cabinet doors per day).

1.1. Calculate the total cost of labour per day before and after the new equipment. Calculate the total cost of the machine per day before and after the new equipment.

1.2. Calculate labour productivity before and after the new equipment. Use cabinet doors per labour-hour as the measure of labour productivity.

1.3. Calculate the multifactor productivity before and after the new equipment. Use cabinet doors per dollar cost (labour plus machine) as the measure of multifactor productivity.

1.4. Calculate the percentage changes in labour productivity and multifactor productivity.

1.5. Management's expectation for the firm is a multifactor productivity increase of 30% once the new equipment is installed. Based on your answer to question (1.4.), did the firm reach this goal? If it did not, by how many units must output per day be increased to achieve a 30% improvement in multifactor productivity (relative to before the new equipment is installed)?