A Company Has Introduced a Process Improvement That Reduces Processing

question 31

Essay

A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required.Under the old process, five workers could produce 60 units per hour.Labor costs are $12/hour, and material input was previously $16/unit.For the new process, material is now $10/unit.Overhead is charged at 1.6 times direct labor cost.Finished units sell for $31 each.What increase in productivity is associated with the process improvement?

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