Concept explainers
To determine: The productivity of Person GK and to know whether the organization is maintaining a manufacturing average of 3% increase in productivity every year.
Introduction: Productivity is a measure of the effectiveness of an individual, systems, machinery and other equipment that are used in converting inputs into outputs. In all organizations, productivity is an important determinant to know the cost efficiency.
Answer to Problem 5P
Person GK is maintaining the manufacturing average of a 3% increase in productivity per year in all the resources except capital.
Explanation of Solution
Given information: Person GK is producing bowling balls. The amount of resources used last year and in the current year is given as follows:
| 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 | 2,850 |
Formula to calculate productivity for last year and the current year:
The productivity is calculated by dividing the total number of units produced by the total input used to produce the overall output.
Formula to calculate the change in the production units:
The change in production units are calculated by subtracting the current year’s productivity from the previous year’s productivity value.
Formula to calculate the percentage of productivity change:
The percentage change in productivity is calculated by dividing the change in productivity units by the initial productivity.
Substitution:
| Resource | Last-year productivity | Current year productivity | Change in production units | Percentage of productivity change |
| Labor | 3.33 | 3.64 | 0.30 | 9.01% |
| Resin | 20.00 | 22.22 | 2.22 | 11.1% |
| Capital | 0.10 | 0.09 | -0.01 | -10% |
| Energy | 0.33 | 0.35 | 0.02 | 6.06% |
Working note:
Calculate last-year productivity for labor:
The productivity is calculated by dividing the total number of units produced by the total input used to produce the overall output.
Calculate last-year productivity for resin:
The productivity is calculated by dividing the total number of units produced by the total input used to produce the overall output.
Note: The calculation continues for capital and energy.
Calculate current year productivity for labor:
The productivity is calculated by dividing the total number of units produced by the total input used to produce the overall output.
Calculate current year productivity for resin:
The productivity is calculated by dividing the total number of units produced by the total input used to produce the overall output.
Note: The calculation continues for capital and energy.
Calculate the change in the production units for labor:
The change in production units are calculated by subtracting the current year’s productivity from the previous year’s productivity value.
Calculate the change in the production units for resin:
The change in production units are calculated by subtracting the current year’s productivity from the previous year’s productivity value.
Note: The calculation continues for capital and energy.
Calculate the percentage of productivity change for labor:
The percentage change in productivity is calculated by dividing the change in productivity units by the initial productivity.
Calculate the percentage of productivity change for resin:
The percentage change in productivity is calculated by dividing the change in productivity units by the initial productivity.
Note: The calculation continues for capital and energy.
Hence, Person GKis maintaining the manufacturing average of a 3% increase in productivity per year in all the resources except capital.
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Chapter 1 Solutions
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