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The document discusses productivity calculations for a US manufacturing company and its subsidiary in a less developed country. It calculates partial labor and capital equipment productivity measures which seem misleading, as the capital productivity is higher in the LDC contrary to expectations. It then calculates a multifactor productivity measure which provides better results. Raw material productivity is also calculated and may be higher in the LDC due to lower raw material costs typical of LDCs. Further productivity measures and analysis are presented for a company in 2004 and 2005 which indicate an overall declining productivity due to drops in labor and raw material productivity.

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98 views4 pages

Answers mgt236

The document discusses productivity calculations for a US manufacturing company and its subsidiary in a less developed country. It calculates partial labor and capital equipment productivity measures which seem misleading, as the capital productivity is higher in the LDC contrary to expectations. It then calculates a multifactor productivity measure which provides better results. Raw material productivity is also calculated and may be higher in the LDC due to lower raw material costs typical of LDCs. Further productivity measures and analysis are presented for a company in 2004 and 2005 which indicate an overall declining productivity due to drops in labor and raw material productivity.

Uploaded by

Chris-ughn Diaz
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 4

A U.S.

manufacturing company operating a subsidiary in an LDC (less developed


country) shows the following results:
U.S LDC
Sales (units) 100,000 20,000
Labor (hours) 20,000 15,000
Raw Materials (currency) $20,000 FC 20,000
Capital Equipment (hours) 60,000 5,000

a. Calculate partial labor and productivity figures for the parent and the
subsidiary.
Do the result seem misleading?
b. Compute the multifactor productivity figures for labor and capital together.
Are the results better?
c. Calculate raw material productivity figures (unit/$ where $1= FC 10). Explain
why these figures might be greater in the subsidiary.

a. Labor Productivity

Country Output in Units Input in Hours Productivity (Output/Input)


U.S 100,000 20,000 100,000/20,000 = 5
LDC 20,000 15,000 20,000/15,000 = 1.33

Capital Equipment Productivity

Country Output in Units Input in Hours Productivity (Output/Input)


U.S 100,000 60,000 100,000/60,000 = 1.67
LDC 20,000 5,000 20,000/5,000 = 4

Yes, the results are misleading as you would expect the capital equipment
productivity measure to be higher in the U.S. than in a LDC.

5b. Multifactor – Labor and Capital Equipment

Country Output in Units Input in Hours Productivity (Output/Input)


U.S 100,000 20,000+60,000 = 80,000 100,000/80,000 = 1.25
LDC 20,000 15,000+5,000 = 15,000 20,000/20,000 = 1

Yes, results are better because labor and equipment can be substituted for each other.
Therefore, this multifactor measure is a better indicator of productivity in this
instance.

5c. Raw Material Productivity

Country Output in Units Input in Hours Productivity (Output/Input)


U.S 100,000 $20,000 100,000/20,000 = 5.00
LDC 20,000 FC $20,000/10 = $2,000 20,000/2,000 = 10.00

Raw material productivity measures might be greater in the LDC due to a reduced
cost paid for raw materials, which is typical of LDC’s.

6 Various financial data for 2004 and 2005 follow. Calculate the total productivity
measure and the partial measures for labor, capital, and raw materials for this
company for both years. What do these measures tell you about this company?
2004 2005
Output: Sales $200,000 $220,000
Input: Labor 30,000 40,000
Raw Materials 35,000 45,000
Energy 5,000 6,000
Capital 50,000 50,000
Other 2,000 3,000

6 Total Productivity

Year Output in Dollars Input in Dollars Productivity (Output/Input)


1998 $200,000 $30,000+35,000+5,000+50,000+2,000 = $122,000 200,000/122,000 = 1.64
1999 $220,000 $40,000+45,000+6,000+50,000+3,000 = $144,000 220,000/144,000 = 1.53

Partial Measure – Labor

Year Output in Dollars Input in Dollars Productivity (Output/Input)


1998 $200,000 $30,000 200,000/30,000 = 6.67
1999 $220,000 $40,000 220,000/40,000 = 5.50

Partial Measure – Raw Materials

Year Output in Dollars Input in Dollars Productivity (Output/Input)


1998 $200,000 $35,000 200,000/35,000 = 5.71
1999 $220,000 $45,000 220,000/45,000 = 4.89

Partial Measure – Capital

Year Output in Dollars Input in Dollars Productivity (Output/Input)


1998 $200,000 $50,000 200,000/50,000 = 4.00
1999 $220,000 $50,000 220,000/50,000 = 4.40

The overall productivity measure is declining, which indicates a possible problem.


The possible measures can be used to indicate cause of declining productivity. In this
case, it is a combination of declines in both labor productivity and raw material
productivity, but an increase in capital productivity. Further investigation should be
taken to explain the drops in both labor and raw materials productivity. An increase
in the cost of both of these measures, without an accompanying increase in the selling
price might explain these measures.

1e A retail store had sales of $45,000 in April and $56,000 in May. The store
employs
eight full-time workers (they work a 40-hour week). In April the store also had
seven part-time workers at 10 hours per week, and in May the store had 9 part-
timers at 15 hours per week (assume four weeks in each month). Using sales
dollars as the measure of output, what is the percentage change in productivity
from April to May?

1e.

Month Output in Dollars Input in Hours Productivity (Output/Input) Percentage Change


April $45,000 1,560 45,000/1,560 = 28.85
May $56,000 1,820 56,000/1,820 = 30.77 (30.77-28.85)/28.85 = 6.67%

2e A fast-food restaurant serves hamburgers, cheeseburgers, and chicken


sandwiches.
The restaurant counts a cheeseburger as equivalent to 1.25 hamburgers and
chicken sandwiches as 0.8 hamburgers. Current employment is five full-time
employees (who work a 40-hour week). If the restaurant sold 700 hamburgers,
900 cheeseburgers, and 500 chicken sandwiches in one week, what is the
productivity? What would its productivity have been if it had sold the same
number of sandwiches (2,100) but the mix was 700 of each type?

2e.

Part Output in Hamburger Equivalents Input in Hours Productivity (Output/Inpu


Hamburgers--- 700
Cheeseburgers--- 900*(1.25) = 1125
Chicken Sand--- 500*(0.8) = 400
2,225 200 2,225/200 = 11.125
Hamburgers--- 700
Cheeseburgers--- 700*(1.25) = 875
Chicken Sand--- 700*(0.8) = 560
2,135 200 2,135/200 = 10.675

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