Chapter 2, Problem 6PA

(a)

Summary Introduction

Interpretation:The measure of productivity in relation to the units of output per dollar of input during the four year period.

Concept Introduction:The key focus of operations management is to enhance the productivity of processes within firms. Productivity simply means the ratio between the inputs and the outputs of a process. Organizations strive to obtain a higher output with lesser inputs. Such a situation would ideally be called a high productivity situation. Sometimes, organizations spend enormous amounts on a specific kind of an input such as machinery. This may sometimes be considered in vain. However, although the initial cost is high, it would ultimately bring down other expenses such as labor costs in the long run.

(b)

Summary Introduction

Interpretation:Consideration on purchasing new equipment that would reduce the annual labor cost.

Concept Introduction:Productivity is the ultimate goal of operations management. It simply refers to the ratio between inputs and outputs. Businesses manage their processes in such a way that they can obtain a higher output by spending a lesser input. When inputs are lesser than outputs, it is a situation of higher productivity. There are instances where organizations incur a lot of inputs but the productivity of the same is obtained over a long period of time. The annual labor cost coming down over a number of years due to the implementation of a new machine is an example for the above.