“When it comes to the current cost of production for manpower and material for the current production line, it is necessary to determine the hourly wages for the workers. Each standard workday utilized 10 individuals working eight hours. This is eighty hours a day. Multiply this by the five workdays to come to 400 work hours. As the workers are paid RM5 per hour, the total five-day work period pays RM 2,500 per week. On the weekend, there are 14 workers working eight hours a day. This is 112 hours a day, or 224 hours per weekend. As the workers are paid RM10 an hour, the total pay for the weekend is RM 2,240 for a total worker cost of RM 4,740 a week. As for the cost of material, every workday makes 20,000 loaves of bread, multiplied by five is 100,000. And with 50,000 made over Saturday and Sunday, the total amount of bread comes to 150,000 loaves. 1,000 grams is in a kg, so Ane uses 150 kg of flour. Multiply this by RM2.60 and it equals RM 390. Add the 4,740 plus 390 and the 500 per week on utilities and it equals RM 5,630 per week. During the new production line, it cuts the worker cost in half to 2370. The output doubles, so the cost of flour goes to 780, the utilities bill doubles to 1,000 and the weekly capital cost is 400. This totals RM 3,551 for the same workweek.
If a labor productivity hour is 250 loves, and he needs 28,000 loaves over the weekend, this means there needs to be 112 man hours. In order to reach this he needs the same standard 14 workers working eight hours a day as this equals the desired amount.
Ultimately, it is a better for Ane to utilize the newly installed technology if he wishes to grow his company and expand upon it. It is going to cost less for him to install the equipment and have half as many workers, even if he was only able to produce the same amount of bread. However, he is going to double his output, which not only means he is going to double his profits, but he is going to save money from reducing the amount of salary he has to pay out. Essentially, he could even increase the amount he pays his workers each and every day and by hour and still turn in a healthy profit. This he can use to pay off his investment faster, so eventually he’ll be able to save the RM 400 a week he pays to it. This alone proves incredibly productive, so as long as there is a need for the additional loaves of bread, it is worth the investment…”
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