Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 25% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes 1,800 loaves per month. The pay is $8 per hour per employee and each employee works 160 hours per month. Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $150 per month, but he will achieve the same new output (an increase to 2,250.00) as the change in labor hours.

Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 25% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed. The bakery currently makes 1,800 loaves per month. The pay is $8 per hour per employee and each employee works 160 hours per month. Charles Lackey can also improve the yield by purchasing a new blender. The new blender will mean an increase in his investment. This new blender will mean an increase in his costs of $150 per month, but he will achieve the same new output (an increase to 2,250.00) as the change in labor hours. a. Current productivity per labor dollar if the process requires 4 employees: = loaves/dollar b. If Charles must increase the total number of work hours to 790 in order to employ the new oven loading technique and meet the increased demand, then the productivity would be loaves/dollar c. By adding manpower, the percentage increase in productivity is % d. If Charles instead chooses to purchase a new blender (while holding labor constant at 640 hours at $8 per hour), then the productivity is loaves/dollar e. By purchasing a new blender (while holding labor constant at 640 hours at $8 per hour), the percentage increase in productivity is (comparing the answer in a. to the answer in d.)