Gibson Products Produces Cast Bronze Valves for Use in Offshore

question 135

Essay

Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently, Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15-minute break during the morning work session and another at the afternoon work session. Gibson is in a competitive industry and needs to increase productivity to stay competitive. They feel that a 20 percent increase is needed.
Gibson's management believes that the 20 percent increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day.
(a) Calculate labor productivity for the initial situation.
(b) Calculate labor productivity for the hypothetical 20 percent increase.
(c) What is the productivity after the change in work rules?
(d) Write a short paragraph analyzing these results.

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Definitions:

Horizontal Merger

A business consolidation that occurs between firms operating in the same industry.

Conglomerate Merger

A merger between companies operating in different industries, aimed at diversification or expansion of a corporate portfolio.

Vertical Merger

The combination of two or more companies involved in different stages of the production process of the same good or service.

Marketing Chain

The marketing chain refers to the sequence of intermediaries that goods or services pass through from the producer to the final consumer.