Two types of cars were produced by a car manufacturer in2008. Quantities sold, p
ID: 2661554 • Letter: T
Question
Two types of cars were produced by a car manufacturer in2008. Quantities sold, prices per unit, and labor hoursfollow. What is the labor productivity for each car? Explain theproblem(s) associated with the labor productivity.Quantity $/unit
DeluxeCar 4,000 unitssold $8,000/car
LimitedCar 6,0000unitssold $9,500/car
Labor,deluxe 20,000hours $12/hour
Labor,Limited 30,000hours $14/hour
Explanation / Answer
Deluxe car: (4000 * $8000) / (20000 * $12) = 133.333 Limited car: (6000 * $9500) / (30000 * $14) = 135.714 While the measure of labor productivity is useful in that itprovides a quantitative summary, some problems encountered inmeasuring productivity includes that it does not separately measurethe contribution of other factors of production as opposed to thecontributions of labor. Factors that affect the use of labor, suchas improvements in technology, economics of scale, and managerialskill, are included into the productivity measure, but this simplemeasure fails to segregate the joint factors.
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