A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new process, 6 workers can produce 75 units per hour, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost for both processes.
a) What was the multifactor productivity in dollars with the old process?
b) What is the multifactor productivity in dollars with the new process?
c) What is the increase in productivity?
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