Liberty Insurance Company processes application forms. The average output in a week is 600 claims. Currently the staff includes six full-time employees who work 40 hours per week and earn $18 per hour including fringe benefits. Management has invested in computer technology that has a weekly cost of $1,200. Materials and energy are not used in significant amounts.
a. What is the productivity of the application process?
b. Suppose Liberty decides to invest in additional computer equipment that will drive the weekly cost of information technology to $1,800. One of the application evaluators is retiring and will not be replaced. The remaining five processors should be able to do 650 applications per week with the new technology. What is the impact on productivity (please give both the new productivity ratio and the percentage change in productivity from part a)?