Hieber Company Produces Pants That Use Two Inputs-Materials and Labour

Essay

Hieber Company produces pants that use two inputs-materials and labour.During the past quarter,1,000 units were produced,requiring 2,000 kilograms of material and 1,000 hours of labour.An engineering efficiency study commissioned by the local university revealed that Hieber Company can produce the same output of 1,000 units using either of the following two combinations of inputs:
$\begin{array}{cccc}& \text { Materials } & \text { Labour } \\\text { Combination A } & 1,750 & 875 \\\text { Combination B }& 2,000 & 750\end{array}$ The cost of materials is $2.50 per kilogram; the cost of labour is $5 per hour.
a.Compute the productivity ratio for each input of Combination A.
b.Does this represent a productivity improvement over the current use of inputs?
c.What is the total dollar value of the improvement? Classify this as a technical or input trade-off efficiency improvement.