Productivity measure
Q1. Ox Industries is compiling the monthly productivity report. From the following data,
calculate:
a) Labor productivity
b) Machine productivity
c) Multifactor (total) productivity
Units produced 100,000
Labor hours 10,000
Machine hours 5,000
Cost of materials RM35,000
Cost of energy RM15,000
The average labor rate is RM15 an hour, and the average machine usage rate is RM10 an
hour.
Answer:
a) Labor productivity = output/labor input = 10 units/hour
b) Machine productivity = output/machine input = 20 units/hour
c) Multifactor productivity = 0.4 unit per RM
Q2. Suppose that a company produced 300 standard bookcases last week using eight workers
and produced 240 standard bookcases this week using six workers. In which period was
productivity higher? Explain.
Answer:
300 SBC
=37 . 5 SBC/W last week
8W
2.
240 SBC
=40 SBC/W this week
6W
Higher productivity this week.
Q3. The manager of a crew that installs carpeting has tracked the crew’s output over the past several
weeks, obtaining these figures:
Week Crew Size Meters Installed
1 4 960
2 3 702
3 4 968
4 2 500
5 3 696
6 2 500
Compute the labor productivity for each of the weeks. On the basis of your calculations, what can you
conclude about the crew size and productivity?
Answer:
3
Week Crew Size Meters Installed Labor Productivity
1 4 960 240 meters
2 3 702 234
3 4 968 242
4 2 500 250
5 3 696 232
6 2 500 250
Possibly even-sized crews are better than odd sizes and a crew of 2 seems to work best.
Q4. Compute the multifactor productivity measure for each of the week shown. What do the
productivity figures suggest? Assume 40-hour weeks and an hourly wage of $12. Overhead is 1.5
times weekly labor cost. Material cost is $6 per kilogram.
Week Output Workers Material-
(units) (kg)
1 30,000 6 450
2 33,600 7 470
3 32,200 7 460
4 35,400 8 480
Q5. A company that makes shopping carts for supermarkets and other stores recently purchased some
new equipment that reduces the labor content of the jobs needed to produce the shopping carts.
Prior to buying the new equipment, the company used five workers, who produced an average
of 80 carts per hour. Workers receive $10 per hour, and machine cost was $40 per hour. With
the new equipment, it was possible to transfer one of the workers to another department, and
equipment cost increased by $10 per hour while output increased by four carts per hour.
a) Compute labor productivity under each system. Use carts per worker per hour as the measure
of labor productivity
b) Compute the multifactor productivity under each system. Use carts per dollar cost (labor plus
equipment) as the measure
c) Comments on the changes in productivity according to the two measures, and on which one
you believe is the more pertinent for this situation
Q6. An operation has a 10 percent scrap rate. As a result, 72 pieces per hour are produced.
What is the potential increase in labor productivity that could be achieved by eliminating the
scrap?
Q7. A manager checked production records and found that a worker produced 160 units while
working 40 hours. In the previous week, the same worker produced 138 units while working
36 hours. Did the worker’s productivity increase, decrease, or remain the same? Explain.
Q8. The following table show data on the average number of customers processed by several
bank service units each day. The hourly wage rate is $25, the overhead rate is 1.0 times labor
cost, and material cost is $5 per customer.
Unit Employees customers processed
A 4 36
B 5 40
C 8 60
D 3 20
a) Compute the labor productivity and the multifactor productivity for each unit
b) Suppose a new, more standard procedure is to be introduced that will enable each
employee to process one additional customer per day. Compute the expected labor and
multifactor productivity rates for each unit. For multifactor productivity assume an 8-
hour day.
Q9. OMAR Industries maintain production facilities in several locations around the globe.
Average monthly cost data and output levels are as follows:
Units (in 000’s) Cinncinnat Frankfurt Guadalajar Beijing
i a
Finished goods 10,000 12,000 5,000 8,000
Work-in- 1,000 2,200 3,000 6,000
process
Costs (in 000’s) Cinncinnat Frankfurt Guadalajara Beijing
i
Labor costs $3,500 $4,200 $2,500 $800
Material costs $3,500 $3,000 $2,000 $2,500
Energy costs $1,000 $1,500 $1,200 $800
Transportation $250 $2,500 $2,000 $5,000
costs
Overhead costs $1,200 $3,000 $2,500 $500
(a) Calculate the labor productivity of each facility
(b) Calculate the multifactor productivity of each facility
(c) If OMAR needed to close one of the plants, which one would you choose? And why?
