Question

The Acme Widget Company can produce 4000 widgets an hour. To produce the 4000 widgets, the labor cost is $200, the material cost is $100, and the overhead cost runs $200. The multifactor productivity of the firm is ____ widgets per dollar.

Answer 1

Answer:

The multifactor productivity of the firm is 8 widgets per dollar

Explanation:

Total cost to produce 4,000 widgets = labor cost + material cost + overhead cost.

The Acme Widget Company produces the 4,000 widgets with the labor cost is $200, the material cost is $100, and the overhead cost runs $200.

Total cost to produce 4,000 widgets = $200 + $100 + $200 = $500

Cost per widget = $500/4,000 = $0.125

Number of widgets are produced per dollar = 1/$0.125 = 8 widgets