Chapter 02 – Competitiveness, Strategy, and Productivity
73. 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?