• February 3rd, 2017

OM

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Assignment 1: Atlantic milk factory needs your consulting advice concerning its
business and production processes. The final consulting report describes several steps
to increase productivity including implementation of cutting-edge processing
techniques through more powerful filtering systems. The following table shows
information for the existing and proposed systems.
Current System New System
No. of workers 18 14
Milk produced 2500 gallons 3400 gallons
Wage rate/hour $14 $14
Filtration cost/hour $135 $190

2

a) What are the inputs and output and their values in the Atlantic milk factory? (2
marks)

b) Calculate the multifactor productivity for both systems. (3 marks)

c) Assume that current production system includes 900 gallons of Grade-A milk sold at
$3.40/gallon, 600 gallons of Grade-B milk at $2.90/gallon and 1000 gallons of Grade-C
milk at $1.50/gallon. Furthermore, assume that under the new system, processing will
include 2000 gallons of Grade-A milk at $2.40/gallon and 1400 gallons of Grade-B milk
at $1.90/gallon. Compare the multifactor productivity in the existing and new systems.
(5 marks)

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