Brown's, a local bakery, is worried about increased costs particularly energy. Last year's records can provide a fairly good estimate of the parameters for this year. Wende Brown, the owner, does not believe things have changed much, but she did invest an additional $3,000 for modifications to the bakery's ovens to make them more energy efficient. The modifications were supposed to make the ovens at least 20% more efficient. Brown has asked you to check the energy savings of the new ovens and also to look over other measures of the bakery's productivity to see if the modifications were beneficial. You have the following data to work with: Last Year Now
Production (dozen) 1,500 1,500
Labor (hours) 340 320
Capital Investment ($) 15,000 18,000
Energy (BTU) 3,200 2,800

Energy productivity increase =
Capital productivity increase=
Labor productivity increase =

Energy Productivity Last year is

= Output ÷ Energy

= 15000 ÷ 3000 doz/BTU

= 5 dozen/BTU

Energy Productivity Now

= Output ÷ Energy

= 15000 ÷ 2800

= 5.3571 dozen/BTU

Thus, Increase % = (5.3571-5) ÷ 5 × 100 = 7.14%

Energy Productivity increase is 7.14%

Capital Productivity Last year = Output ÷ Capital

= 15000 ÷ 15000 doz/$

= 1 dozen/$

Capital Productivity Now = Output ÷ Capital

= 15000 ÷ 18000

= 0.8333 dozen/$

Thus, Increase % = (0.8333-1) ÷ 1 × 100

= -16.67%

Capital Productivity increase is -16.67%

Labour Productivity Last year = Output  ÷ Labour

= 15000 ÷ 360 doz/hour

= 41.6667 dozen/hr

Labour Productivity Now = Output  ÷Labour

= 15000  ÷320

= 46.8750 dozen/hr

Thus, Increase % = (46.8750-41.6667)  ÷41.6667*100

= 12.50%

Labour Productivity increase is 12.50%

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a. 12.5%

b. -16.67%

c. 5.88%

Explanation:

a. Energy Change will be:

(Production x 12)/Energy

Last year : (1500 × 12)/3200

= 5.625loaves/BTU

Now : (1500 × 12)/2800

= 6.42857 loaves/BTU

Percent Change will be:

= [6.42857 - 5.625]/6.42857 × 100

= 12.5%

b. Capital productivity increase will be:

= Production x 12)/Capital investment

Last year : (1500 × 12)/15000

= 1.2loaves/BTU

Now : (1500 × 12)/18000

= 1 loaves/BTU

Percent Change will be:

= (1-1.2)/1.2 × 100

= -16.67%

b. Labor Change:

Last year : (1500 × 12)/340

= 52.94 loaves/labor hour

Now : (1500 × 12)/320

= 56.25 loaves/labor hour

Percent Change:

= (56.25 - 52.94/56.25) × 100

= 5.88%

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