The Abco Company manufactures electrical assemblies. The current process uses 10 workers and produces 200 units per hour. You are considering changing the process with new assembly methods that increase output to 300 units per hour, but will require 14 workers. Particulars are as follows:
CURRENT PROCESS NEW PROCESS
OUTPUT (UNITS / HOUR) 200 300
NUMBER OF WORKERS 10 14
MATERIAL COST / HOUR $120 $150
Workers are paid at a rate of $10 per hour, and overhead is charged at 140% (or 1.4 times) labor costs. Finished switches sell for $20 / unit.
a. Calculate the multifactor productivity for the current process
b. Calculate the multifactor productivity for the new process
c. Determine if the new process should be implemented