# Chapter 2

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## Chapter 2

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1. Chapter 2 Problem

2. Productivity Formulas • Productivity = Output Produced / Input Used • Partial Prod. = Output / Labor • Partial Prod. = Output / Machines • Multifactor = Output / Labor + Machines • Multifactor = Output / Labor + Materials • Multifactor = Output / Labor + Capital + energy

3. Problem • Collins Title wants to evaluate its labor and multifactor productivity with a new computerized title search system. The company has a staff of 4, each working an 8 hour shift (total payroll cost/day = \$640/day) with overhead expenses of \$400/day. Collings processes 8 titles per day. The new system will allow 14 titles to be completed. With the new system, the staff, hours, and pay are the same. However, the overhead expenses are now \$800 / day. • Will the new system save them money over the long run?

4. Solution • Productivity Old System = 8 titles/32 hours = .25 titles per labor hour • Productivity New System = 14 titles/32 hours= .4375 titles per labor hour • An increase of .4375 - .25 = .1875 more per hour or an increase of 75%. .4375 / .25 = 1.75 or 75%. • Is this enough to justify the new system?

5. Need more information • Multifactor Productivity Old system 8 titles / \$640 + \$400 = .0077 titles per dollar. • Multifactor Productivity New System 14 titles / \$640 + \$800 = .0097 titles per dollar. • Multifactor productivity increases from .0077 to .0097 or 26% increase .0097 / .0077 = 1.26. • Is it worth it?ookl8