Question 6 U.S 100,000 20,000 $20,000 60,000 LDC Sales (units) Labor (hours) Raw

Question

Question 6 U.S 100,000 20,000 $20,000 60,000 LDC Sales (units) Labor (hours) Raw materials (currency) Capital equipment (hours) 20,000 15,000 FC 20,000 5,000 a. Calculate partial labor and capital productivity figures for the parent and subsidiary. Do the results seem misleading? b. Compute the multifactor productivity figures for labor and capital together. Are the results better? c. Calculate raw material productivity figures (units/$ where $1 = FC 10). Explain why these figures might be greater in the subsidiary Various financial data for 2009 and 2010 follow. Calculate the total productivity measure and 6 the partial measures for labor, capital, and raw materials for this company for both years. What do these measures tell you about this company? 2009 2010 $200,000 30,000 35,000 5,000 50,000 2.000 $220,00o 40,000 45,000 6,000 50,000 Output Sales Input: Labor Raw materials Energy Capital Other 3,000

Explanation / Answer

TOTAL PRODUCTIVITY

Partial Measure – Labor

Partial Measure – Raw Materials

Partial Measure – Capital

The overall productivity measure is going less, which indicates a possible risk or problem. The partial measure result can be used to find the cause of the declining productivity. In this case, it is a combination of declines in both labor and raw material productivity, but an increase in the capital productivity. Further investigation should be undertaking to explain the drops in both labor and raw material productivity. An increase in the cost of both of these measures, without an accompanying increase in the selling price might explain these measures.  

Year Output Input Productivity(Output/Input) 2009 200,000 30,000 + 35,000 + 5,000 + 50,000 + 2,000 = $122,000 200,000/122,000 = 1.64 2010 220,000 $40,000 + 45,000 + 6,000 + 50,000 +3,000 = $144,000 220,000/144,000 = 1.53

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