Tourism Production Services process output is calculated at $125 per unit and th

Question

Tourism Production Services process output is calculated at $125 per unit and the labour cost including benefits is $58. Below is the process data for the last 4 weeks. Item Week 1 Week 2Week 3Week 4 Units Produced Labour S Material $ Overhead- $ 1,133 1,303 1,201 13,10114,858 11,196 978 9,945 21,45624,79920,845 18,501 7,555 8,741 10,511 8,742 Using the multifactor productivity ratio, assess if recent process improvements have made any impact and if so, when did the change start? a. 5 marks) Using the labour productivity ratio, indicate if there is a change in the labour productivity? b. (3 marks)

Explanation / Answer

To arrive at required answers, we follow following steps while constructing relevant table:

1)List units produced in first row

2) List Unit turnover in 2nd row . Unit turnover = Unit produced x $125

3) List Labour $ in 3rd row

4) Calculate and write Labour productivity in 4th row . Labour productivity = Unit turnover / Labour $

5) Calculate and list total cost in 5th row. Total cost = Labour $ + Material $ + Overhead $

6) Calculate and list Multifactor productivity in last row. Multifactor productivity = Unit turnover $ / Total cost $

Item

Week 1

Week 2

Week 3

Week 4

Units produced

1133

1303

1201

978

Unit turnover, $

141625

162875

150125

122250

Labour $

13101

14858

11196

9945

Labour productivity

10.81

10.96

13.41

12.29

Total cost, $

43298

50168

40783

36001

Multifactor productivity

3.27

3.25

3.68

3.40

a)Using Multifactor productivity ratio , we can observe that productivity improvement started during week 3 and tapering down in week 4 in spite of the fact that productivity of week 4 was more than that of week 1 and week 2
b)Using labour productivity ratio , one can conclude that there has been a steady increase in labour productivity over the years which started from 10.81 in week 1 and ended at 12.29 during week 4

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