The Big Black Bird Company (BBBC) has a large order for special plastic-lined military uniforms to be used in an urgent military operation. Working the normal two shifts of 40 hours, the BBBC production process usually produces 2,500 uniforms per week at a standard cost of $120 each. Seventy employees work the first shift and 30 the second. The contract price is $200 per uniform. Because of the urgent need, BBBC is authorized to use around the-clock production, six days per week. When each of the two shifts works 72 hours per week, production increases to 4,000 uniforms per week but at a cost of $144 each.
a. Did the productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?
SOLUTION
PREVIEW
Present:
Value
of output = 2500 uniforms * std. cost of $120 = $300,000
Value
of input = (70 employees for first shift + 30 employees for second shift) * 40
hours * $200 contract price.
= $800,000
Productivity
ratio = 300,000 = 0.375
800,000
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