Eric Johnson makes billiard balls in his New England plant. With recent increase

Question

Eric Johnson makes billiard balls in his New England plant. With recent increases in his costs, he has a newfound interest in efficiency. Eric is interested in determining the productivity of his organization. he would like to know if his organization is maintaining the manufacturing average of a 3% incease in productivity. He has the following data representing a month from last year and quivalent month this year: Last Year Now Units Produced 1,000 1,000 Labor (hours) 300 275 Resin (pounds) 50 45 Capital Invested ($) 10,000 11,000 Energy (BTU) 3,000 2,875 The productivity change for each of the inputs (Labor, Resin, Capital,and Energy) is: a) Labor Productivity Change = _____% b) ResinProductivity Change = _____% c) Capital Invested Productivity Change = ______% d) Energy productivity change = ______% please show working method

Explanation / Answer

The typical standard for comparison

1.

Units produced: (1000 – 1000) ÷ 1000 = 0 = 0%

Therefore, it is clear that there is no change in the units produced.

2.

Labor: (275 – 300) ÷ 300 = –0.083 = (8.3%)

Therefore, it is clear that the labor hours has reduced 8.3%.

3.

Resin: (45 – 50) ÷ 50 = –0.1 = (10%)

Therefore, it is clear that the use of resin has reduced 10%.

4.

Capital: (11,000 – 10,000) ÷ 10,000 = 0.1 = 10%

Therefore, it is clear that the capital has increased 10%.

5.

Energy: (2,875–3,000)÷3,000 = –0.042 = (4%)

Therefore, it is clear that the use of energy has reduced 4%.

Last year labor productivity: 1000 ÷ 300 = 3.33 units ÷ labor hour

Current year labor productivity: 1000 ÷ 275 = 3.64 units ÷ labor hour

Percentage change in productivity:

(3.64 – 3.33) ÷ 3.33 = 0.093 = 9.3%

The productivity has increased 9.3%.

So, Eric Johnson’s organization is successful to maintain the manufacturing average of 3% increase in productivity.

Capital productivity: output ÷ capital input

Last Year =output ÷ capital input

=1000 ÷ 10000 ÷

=0.1

=10 %

Now =output ÷ capital input

=1000÷11000

= 0.090

=9.09 %

Change in % = (9.09 – 10) ÷ 10 × 100

= Decrease in 9.1 %

Here productivity decreases that means the additional capital investment which is done is not helping to improve the productivity.

Material productivity: output ÷material input

Last Year = 1000 ÷ 50

=20

Now =1000 ÷ 45

=22.22

Change in % = (22.22 – 20) ÷20 × 100

= Increase in 11.1 %

An increase in material productivity by 11.1 % means that the materials are efficiently used.

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