A company has introduced a process improvement that reduces

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A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25%, while using less material, but requiring one additional employee. Under the old process, five employees could produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each.

Does the overall productivity increase or decrease; and by what percentage - due the process improvement? Show your work.

Reference no: EM13382598

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