An electronics company makes communications devices for military contracts. The company just completed two contracts. The navy contract was for 2,115 devices and took 25 workers three weeks (40 hours per week) to complete. The army contract was for 5,435 devices that were produced by 37 workers in five weeks. Required:
a. Calculate the productivity for navy and army contracts in units produced per labor hour.
b. On which contract were the workers more productive?

Answer and Explanation:

a. The computation of the production for navy and army contracts is shown below:

For Navy contract

= Number of devices ÷ Number of man hours

where,

Number of devices is 2,115

And, the number of man hours is

= 25 workers × 40 hours × 3 weeks

= 3,000 man hours

Now placing these values to the above formula,

So, the production is

= 2,115 devices ÷ 3,000 man hours

= 0.705

Now for army contract

= Number of devices ÷ Number of man hours

where,

Number of devices is 5,435

And, the number of man hours is

= 37 workers × 40 hours × 5 weeks

= 7,400 man hours

Now placing these values to the above formula,

So, the production is

= 5,435 devices ÷ 7,400 man hours

= 0.7344

b. As we can see that the army contract is more productive than the navy contract as it has more productivity than the navy contract

answer/// equals both average variable cost and average total cost at their respective minimums;