The H & S Motor Company produces small motors at aproduction cost of $30 per unit. Defective motors can be reworkedat a cost of $12 each. The company produces 100 motors per day andaverages 88 percent good quality motors. Based on past experience,50% of the defective motors can be reworked prior to shipping tocustomers. These are also considered good motors. A good motor canbe sold for $100 while a defective motor can be scrapped and soldfor $16. Income consists of both the revenue from the sold motorsand the scrapped motors.
1. Using the number of good motors shipped as the measure ofoutput and the cost of production as the input, what is thecompany's productivity if no defective motors are reworked?
2. Suppose that the company now uses the total income as theoutput measure and the cost of production as the input. What is thecompany's productivity if no defective motors are reworked?
3. Now suppose the company reworks the defective motors that canbe reworked. Using the number of good motors shipped as the measureof output and the cost of production as the input, what is thecompany's productivity now?
4. What is the percent change in productivity comparing theproductivity in #3 to the productivity in #1?
