Thomas Cope, located in Bolton, England, is a manufacturer of stainless steel exhaust hoods used in industrial
kitchens. The firm works 20 days a month, and each
employee works an average of 8 hours per day. To keep
costs down, Thomas Cope employs labor with limited
experience. This causes quality issues, and every day
10 percent of the production is scrapped. Each exhaust
hood sells for £125. Labor is paid at £15/hour, materials cost per exhaust hood is £40, and overhead cost is
£3,500. The firm currently has 250 employees.
a. Calculate the labor and multifactor productivity
ratios.
b. To improve the firm’s multifactor productivity,
Thomas Cope has three choices 1) increase 20 percent
sales by reducing the sales price by 10 percent, 2)
improve quality by hiring skilled labor at £20 per hour
resulting in no defects, or 3) reduce material costs by
10 percent. Which option has the greatest impact on
the multifactor productivity measure?
