The following data are given for a small manufacturing firm: Previous year This
ID: 2817310 • Letter: T
Question
The following data are given for a small manufacturing firm:
Previous year This year
value of the products $6,000,000 $6,500,000
Raw materials used 98,000 units 110,000 units
Cost of materials per unit $4.50 $5.00
Labor hours used: 30,000 hours 26,000 hours
Cost of labor $20 per hour $21per hour
Energy cost $500000 $400,000
other overhead costs 125,000 $ 150,000
{a} Determine partial productivity for labor for each year'
{bJ Determine multi-factor productivity for labor & materials for each year-
{c} Determine the total factor productivity for each year'
(d) Management would like to know the contribution of each input in
determining the growth {or decline} in total factor productivity. Please
prepare a worksheet to help management understand productivity changes
for each factor inPut.
Explanation / Answer
a)You can measure employee productivity with the labor productivity equation: total output / total input.
here, output is value of goods produced and input is total number of hours of labour work.
so partial productivity of labour= value of goods/total labour hours
last year = 6000000/30000 = $200 per hour work
this year = 6500000/26000 = $250 per hour work
b) for multi factor productivity, input is taken as cost of all the factors considered. output remains as the value of goods produced.
total input for last year = total labour cost +total material cost = 30000*20+98000*4.5 = $1041000
multi factor productivity for last year = 6000000/1041000 = 5.763
total input for this year=total labour cost +total material cost = 26000*21+110000*5 = $1096000
multi factor productivity for this year = 6500000/1096000 = 5.93
c) for total factor productivity energy costs and overhead costs are also added to input cost.
so, total cost last year = 1041000+500000+125000 = $1666000
total factor productivity = 6000000/1666000 = 3.601
total cost this year = 1096000+400000+150000 = 1646000
total factor productivity = 6000000/1646000 = 3.645
d) each factor's contribution to total factor productivity can be calculated as ratio of partial factor productivity to sum of partial productivity of all factors.
contribution of labour productivity= partial productivity of labour/(partial productivity of labout + material +other factors)
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