Productivity Improve Productivity, Reduce Costs, Improve Profits

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Productivity Improve Productivity, Reduce
Costs, Improve Profits
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Productivity
Productivity, numerically defined
(i) Total Factor Productivity (TFP) Pt
Ot/(LCRQ)
Pt Total factor Productivity Ot Total
output (sales value ) L Labour Input factor
() C Capital Input factor () R Raw
materials/ purchased parts () Q Other
miscellaneous services ()
(ii) Partial Factor Productivity (PFP) Ot/ L
or C or Ot/ a combination
of inputs
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Productivity

• QUESTION
• Calculate the productivity for the following
  operations
• Three employees process 600 insurance policies in
  a week. They work 8 hours/day, 5 days/week.
• A team of workers make 400 units of a product,
  which is valued by its standard cost of 10 each
  (before markups for other expenses and profit).
  The accounting department reports that for this
  job the actual costs are 400 for labor, 1,000
  for materials, and 300 for overhead.

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Productivity
ANSWER
Policies processed Partial LABOUR
Productivity ------------------------
Employee hours
600 policies --------------------------
--------------- 5 policies/h 3
employees) x 40 h/employee Quantity at
standard cost Multifactor Productivity
--------------------------------------------------
---
Labor cost Materials cost Overheads 400
units x 10/unit 4,000 ---------------
-------------- ---------- 2.35 400
1,000 300 1,700
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Productivity

• QUESTION
• A state owned transportation company charges 18
  per ticket, plus a 3 surcharge to fund planned
  equipment. It expects to sell 4,700 tickets
  during the eight week summer season. During that
  period, the service will experience 110,000 in
  labor costs. Materials required for each passage
  sold (tickets, a tourist-information sheet, and
  the like) cost 1.3. Overhead during the period
  comes to 79,000.
• What is the miltifactor Productivity ratio?
• If the staff works an average of 310
  person-hours per week for the eight weeks of the
  summer season, what is the labor productivity
  ratio on an hour basis?

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Productivity

• ANSWER
• 
  OUTPUT
• Multifactor Productivity --------------
• 
  INPUT
• Tickets sold 4,700
• Price 18 value of the
  output4,700 x 183 98,700
• Surcharge 3
• Labor cost 110,000
• Materials costs 1.3 value of the input
  110,000 1.3 x 4,700
• Overheads 79,000
  79,000 195,100
• multifactor Productivity 98,700/195,100 0.51
• labor productivity 98,700/8x310
  39.8/hr