A cleaning company uses $20 of chemicals, $40 of labour, and $5 of misc. expenses for each house it cleans. After some quality complaints, the company has decided to increase its use of chemicals by 50%. By what % has multifactor productivity fallen?
A) 0%
B) 13.3%
C) 25%
D) 50%
E) 0.83%

Question

Quizplus · Accepted Answer

The original cost is $65 ($20 chemicals + $40 labor + $5 misc.). After increasing chemical use by 50%, the new chemical cost is $30, making the total cost $75. The increase in cost is $10 on the original $75, which is a 13.3% decrease in productivity (since productivity is inversely related to cost).

A Cleaning Company Uses $20 of Chemicals, $40 of Labour