Considering the number of pieces processed per hour as its output, Merrifield Post Office is evaluating the productivity of its mail processing centers. The centers differ in the degree of automation, the type of work that can be performed, and the skill of the workers.
Center 1 2 3
Pieces processed per hour 1,000 2,000 3,000
Number of workers per hour 10 5 2
Hourly wage rate $5.50 $10.00 $12.00
Overhead rate per hour $10.00 $25.00 $50.00
a) Calculate the multifactor productivity for each center.
b) Workers in Center 2 are scheduled to receive a 10% pay raise next month. What will be the change in the multifactor productivity rate? Also, what is the percentage change in the multifactor productivity performance?
c) A new processing machine is available for Center 1 that would increase the output to 1,500 pieces an hour at an additional overhead rate of $30.00 an hour. Merrifield will only install the new processing machine if it increases the multifactor productivity of Center 1 by at least 2.5%. Should Merrifield install the new processing machine? Justify your answer. Also, what is the percentage change in the multifactor productivity performance?