Consider the following information: Store A Store B Number of products sold 5500 4000 Labor hours used 125 110 Material used in lbs 220 120 Labor Cost/hour 8 8 Material Cost/lbs 15 15 Selling price/unit 25 25 Which store utilizes material better

Store B utilizes material better

Explanation:

Store A:

units = 5500q

Labor hs = 125

Material used=220

Store A needs 0,0227hs to make one unit, using 0,04lb of material.

The unitary cost of one unit is = 0,0227*8+0,04*15=$0,7816

Store B:

Units = 4000q

Labor hs=110hs

Material used = 120lb

Store B needs 0,0275 hs and 0,03 of material to make one unit.

The unitary cost of one unit is = 0,0275*8+0,03*15 = $0,67

Store A utilizes fewer hours to make one unit, (0,0275>0,0227) but is less efficient using material (0,03<0,04). Store B utilizes more time using less material resulting in a considerable difference in cost per unit. Store B is more efficient, some reasons can be that workers in store b have more experience or are more capacitated than Store A workers.