Acme Tire Service completed 100 tire changes, 6 brake jobs, and 16 alignments in an eight hour day with his standard crew of 6 mechanics. A brake specialist cost $16 per hour, a tire changer costs $8 per hour and an alighnment mechanic cost $14 per hour. The materials cost for a day was $2000, and overhead cost was $500.
a) What is the shop's labour productivity if the retail proce for each respective service is $60, $150, and $40?
b)What is the multifactor productivity, if the crew consisted of two of each type of mechanic?
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Production and Operations Management
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To calculate the labor productivity of Acme Tire Service, we need to determine the total amount of revenue generated by the different services in relation to the labor cost.
a) Labor Productivity:
1. Calculate the total revenue generated by each service:
- Tire changes: 100 * $60 = $6000
- Brake jobs: 6 * $150 = $900
- Alignments: 16 * $40 = $640
2. Calculate the total labor cost for each service:
- Tire changes: 100 * (6 mechanics * $8 per hour) = $4800
- Brake jobs: 6 * (6 mechanics * $8 per hour + 1 brake specialist * $16 per hour) = $1056
- Alignments: 16 * (6 mechanics * $8 per hour + 1 alignment mechanic * $14 per hour) = $3584
3. Calculate the labor productivity for each service:
- Tire changes: $6000 / $4800 = 1.25
- Brake jobs: $900 / $1056 ≈ 0.85
- Alignments: $640 / $3584 ≈ 0.18
Therefore, the labor productivity for tire changes is 1.25, for brake jobs is 0.85, and for alignments is 0.18.
b) Multifactor Productivity:
To calculate the multifactor productivity, we need to consider the total revenue generated by all services in relation to the total labor cost and total material and overhead cost.
1. Calculate the total labor cost:
- Tire changes: 100 * (2 mechanics * $8 per hour) = $1600
- Brake jobs: 2 * (2 mechanics * $8 per hour + 1 brake specialist * $16 per hour) = $320
- Alignments: 2 * (2 mechanics * $8 per hour + 1 alignment mechanic * $14 per hour) = $512
Total labor cost = $1600 + $320 + $512 = $2432
2. Calculate the total revenue generated by all services:
Total revenue = $6000 + $900 + $640 = $7540
3. Calculate the total material and overhead cost:
Total material and overhead cost = $2000 + $500 = $2500
4. Calculate the multifactor productivity:
Multifactor productivity = Total revenue / (Total labor cost + Total material and overhead cost)
= $7540 / ($2432 + $2500)
= $7540 / $4932
≈ 1.53
Therefore, the multifactor productivity is approximately 1.53 when the crew consists of two mechanics of each type.