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Productivity Analysis and Recommendations

1. The document provides examples of calculating labor productivity, multifactor productivity, and percentage changes in productivity. 2. For a metal valve company, labor productivity increased from 2 valves/hour to 2.25 valves/hour, a 12.5% increase, when production rose from 160 to 180 units per shift. 3. A tire company had labor productivity of 2.5 tires/hour and multifactor productivity of 0.025 tires/dollar using labor, materials, energy, and capital costs. 4. A billiard ball maker saw a 0.078 or 7.8% increase in multifactor productivity from last year to this year based on a comparison of production and total costs.

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139 views3 pages

Productivity Analysis and Recommendations

1. The document provides examples of calculating labor productivity, multifactor productivity, and percentage changes in productivity. 2. For a metal valve company, labor productivity increased from 2 valves/hour to 2.25 valves/hour, a 12.5% increase, when production rose from 160 to 180 units per shift. 3. A tire company had labor productivity of 2.5 tires/hour and multifactor productivity of 0.025 tires/dollar using labor, materials, energy, and capital costs. 4. A billiard ball maker saw a 0.078 or 7.8% increase in multifactor productivity from last year to this year based on a comparison of production and total costs.

Uploaded by

Keeran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Solution

Productivity

1- Riverside Metal Works produces cast bronze valves on a 10-person assembly line. On a recent day,
160 valves were produced during an 8-hour shift.
a) Calculate the labour productivity of the line.
b) The manager at Riverside changed the layout and was able to increase production to 180 units per
8-hour shift. What is the new labour productivity per labour-hour?
c) What is the percentage of productivity increase?

Ans.
1- (a) Labor productivity is 160 valves/80 hours = 2 valves per hour.
(b) New labor productivity = 180 valves / 80 hours = 2.25 valves per hour
(c) Percentage change in productivity = .25 valves / 2
valves = 12.5%

2- David Upton is president of Upton Manufacturing, a producer of Go-Kart tires. Upton makes 1000
tires per day with the following resources:
Labour: 400 hours per day @ $12.50 hour
Raw material: 20 000 pounds per day @ $1 per pound
Energy: $5 000 per day
Capital costs: $10 000 per day
a) What is the labour productivity per labour-hour for these tires at Upton Manufacturing?
b) What is the multifactor productivity for these tires at Upton Manufacturing?
Ans .
(a) Labor productivity = 1,000 tires/400 hours = 2.5 tires/hour.
(b) Multifactor productivity is 1,000 tires/(400 ×
$12.50 + 20,000 × $1 + $5,000 + $10,000) =
1,000 tires/$40,000 = 0.025 tires/dollar.

3- 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
3% increase in productivity. He has the following data representing a month from last year and an
equivalent month this year:

Last Year Now


Units produced 1 000 1 000
Labour(hours) 300 275
Resin(pounds) 50 45
Capital invested($) 10 000 11 000
Energy(BTU) 3000 2850

Ans.

Resource Last Year This Year Change Percentage Change

Labor 0.31

Resin 2.22

Capital –0.01

Energy 0.02

4- Eric Johnson (using data from Problem 3) determines his costs to be as follows:
 Labour: $10 per hour
 Resin: $5 per pound
 Capital expense: 1% per month of investment
 Energy: $0.50 per BTU
Show the percent change in productivity for one month last year versus one month this year, on a
multifactor basis with dollars as the common denominator.

Ans.

4- Last Year This Year


Production 1,000 1,000
Labor hr. @ $10 $3,000 $2,750
Resin @ $5 250 225
Capital cost/month 100 110
Energy 1,500 1,425
$4,850 $4,510

Change=
([
1000
4510 ) −(
4850 )
1000
]
=¿
1000
( )
4850

0.222−0.206 0.016
= =0.078
0.206 0.206

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