Week 1 - Estimating Productivity

Peter operates a bakery in Mong Kok. Because of the bakerys excellent product and location, many customers have not been able to purchase the bread of their choice. Peter estimated that 50% more output (i.e. bread) should be produced to meet the growing demand. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested a new way to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to be changed.

Q1) If the bakery currently makes 1000 loaves of bread per month with a labor productivity of 1.25 loaves per labor-hour, how many more workers, who are as productive as the current ones, will Peter need to add to achieve the new output? Each worker works 200 hours per month.

Q2) In addition to the staffs suggestion, Peter finds that the current output can be increased by 50% by using a new blender which takes less time to make the bread. Although the new blender is an added investment which has a cost of $15,000 per month, no additional workers or labor hours are needed. Currently, the hourly pay for each worker is $50. Peter wants to know whether the first option (i.e. adding more workers) or the second option (i.e. adding a new blender) is better.

1. Taking all inputs into consideration, show the productivity, in loaves of bread per dollar, for the first option. Round the number to 3 decimal places.

2. Taking all inputs into consideration, show the productivity, in loaves of bread per dollar, for the second option. Round the number to 3 decimal places.

3. Which option is better? What is the maximum monthly investment in the new blender that would make the productivity of the two options equal?