Smarmy Sales, Inc. (SSI), sells herbal remedies through its Web site and through
ID: 406032 • Letter: S
Question
Smarmy Sales, Inc. (SSI), sells herbal remedies through its Web site and through phone reps. Over the past six years, SSI has started to depend more and more n its Web site to generate sales. The figures below show total sales, phone rep costs, and Web site costs for the past six years: Calculate the productivity for the phone reps for each of the past six years. Interpret the results. Calculate the productivity for the Web site for each of the past six years. Interpret the results. Compare your results in parts a and b. What are the limitations of these single-factor productivity measures? Now calculate a multifactor productivity score for each year, where the "input" is the total amount spent on both the phone reps and the Web site. Interpret the results. What can you conclude?Explanation / Answer
Productivity = Output / Input
a)Productivity for the phone reps for each of the past 6 years.
Year 2008
Output = $ 4,790,000
Input = $ 200,000
Productivity = 4,790,000/200,000 = 23.95
Year 2009
Output = $ 5,750,000
Input = $ 210,000
Productivity = 5,750,000/210,000 = 27.38
Year 2010
Output = $ 6,900,000
Input = $ 221,000
Productivity = 6,900,000 / 221,000 = 31.22
Year 2011
Output = $ 8,280,000
Input = $ 230,000
Productivity =8,280,000/230,000 = 36
Year 2012
Output = $ 9,930,000
Input = $ 245,000
Productivity = 9,930,000/245,000 = 40.53
Year 2013
Output = $ 11,920,000
Input = $ 255,000
Productivity = 11,920,000/255,000 = 46.74
b) Productivity for the web site costs for each of the past 6 years.
Year 2008
Output = $ 4,790,000
Input = $50,000
Productivity = 4,790,000/50,000 = 95.8
Year 2009
Output = $ 5,750,000
Input = $ 65,000
Productivity = 5,750,000/65,000 = 88.46
Year 2010
Output = $ 6,900,000
Input = $ 85,000
Productivity = 6,900,000/85,000 = 81.17
Year 2011
Output = $ 8,280,000
Input = $ 110,000
Productivity = 8,280,000/110,000 = 75.27
Year 2012
Output = $ 9,930,000
Input = $ 145,000
Productivity = 9,930,000/145,000 = 68.48
Year 2013
Output = $ 11,920,000
Input = $ 190,000
Productivity = 11,920,000/190,000 = 62.73
c) Comparison of a) and b)
In singlr factor productivity, only one input is considered, so it is not a correct measure for productivity.
d) Multifactor Productivity for the for each of the past 6 years.
Year 2008
Output = $ 4,790,000
Input1 = $ 200,000
Input2 = $50,000
Productivity = 4,790,000/250,000 = 19.16
Year 2009
Output = $ 5,750,000
Input 1= $ 210,000
Input2 = $65,000
Productivity = 5,750,000/275,000 = 20.90
Year 2010
Output = $ 6,900,000
Input1 = $ 221,000
Input2 = $85,000
Productivity = 6,900,000 / 306,000 = 22.55
Year 2011
Output = $ 8,280,000
Input1 = $ 230,000
Input2 = $110,000
Productivity =8,280,000/340,000 = 24.35
Year 2012
Output = $ 9,930,000
Input1 = $ 245,000
Input2 = $50,000
Productivity = 9,930,000/295,000 = 33.66
Year 2013
Output = $ 11,920,000
Input 1= $ 255,000
Input2 = $50,000
Productivity = 11,920,000/305,000 = 39.08
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