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MGCR 472 (3)
Final

# Solutions to Productivity Examples on Slides.pdf

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School
McGill University
Department
Management Core
Course
MGCR 472
Professor
Derek Wang
Semester
Winter

Description
1. Example: • 10,000 Units Produced • Sold for \$10/unit • 500 labor hours • Labor rate: \$9/hr • Cost of raw material: \$5,000 • Cost of purchased material: \$25,000 Suppose we hire very efficient workers who can finish the job in 350 hours. What is now the MFP with labor rate of \$9/hr. MFP = (10000*10)/(350*9+5000+25000) = 3.01. So, using more efficient workers, company increased its profitability. However we have to pay higher wages for the more efficient workers. How much extra can we pay without reducing productivity from the original level? Let X be the new wage. Then (10000*10)/(350*X+5000+25000) = 2.9(See page 20 on slides on how to obtain 2.9) => Solve the equation => X =
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