It takes the Blacksburg shipyard twenty six weeks with 500 workers to build a small tanker. Material costs are $32 million and overhead costs are $2 million. Workers cost $40 per hour including benefits and work 40 hours per week. The ship sells for $75 million. What is the multifactor productivity ratio?
A) less than 1.0
B) greater than 1.0 but less than or equal to 2.0
C) greater than 2.0 but less than or equal to 3.0
D) greater than 3.0

Question

Quizplus · Accepted Answer

To calculate multifactor productivity, we need to divide the output value by the input cost.

Input cost = Material costs + Overhead costs + Labor costs
Labor costs = 500 workers * 40 hours/week * 26 weeks * $40/hour = $208 million

Total input cost = $32 million + $2 million + $208 million = $242 million

Output value = $75 million

Multifactor productivity ratio = Output value / Input cost = $75 million / $242 million = 0.31

Since the ratio is less than 1.0, option A is incorrect. 
The ratio is also less than 2.0, so option C and D are incorrect. 
The only remaining option is B, which is the correct answer. The productivity ratio is greater than 1.0 but less than or equal to 2.0.

It Takes the Blacksburg Shipyard Twenty Six Weeks with 500