PRODUCTIVITY
1. Suppose that a company produced 300 standard bookcases last week using eight workers and it
produced 240 standard bookcases this week using six workers. In which period was productivity
higher? Explain.
2. The manager of a crew that installs carpeting has tracked the crew’s output over the past several
weeks, obtaining these figures:
Compute the labour productivity for each of the weeks. On the basis of your calculations, what
can you conclude about crew size and productivity?
3. Compute the multifactor productivity measure for each of the weeks shown. What do the
productivity figures suggest? Assume 40-hour weeks and an hourly wage of $12. Overhead is 1.5
times weekly labour cost. Material cost is $6 per pound. Standard price is $140 per unit.
4. A company that makes shopping carts for supermarkets and other stores recently purchased some
new equipment that reduces the labour 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. Labour cost was $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 labour productivity under each system. Use carts per worker per hour as the measure
of labour productivity.
b. Compute the multifactor productivity under each system. Use carts per dollar cost (labour plus
equipment) as the measure.
c. Comment on the changes in productivity according to the two measures, and on which one
you believe is the more pertinent for this situation.
5. An operation has a 10 percent scrap rate. As a result, 72 pieces per hour are produced. What is the
potential increase in labour productivity that could be achieved by eliminating the scrap?
6. 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.
7. The following table shows 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 labour cost, and
material cost is $5 per customer.
Unit
Employees
Customers processed
A
4
36
B
5
40
C
8
60
D
3
20
1
a. Compute the labour productivity and multifactor productivity for each unit
b. Suppose a new, more standard procedure is to be introduced that will enable each employee to
process one additional customer per day. Compare the expected labour and multifactor
productivity rates for each unit. For multifactor productivity assume an 8-hour day.
8. Two types of cars (Deluxe and Limited) were produced by a car manufacturer in 2008. Quantities
sold, price per unit, and labour hours follow. What is the labour productivity for each car? Explain
the problem associated with the labour productivity.
9. A U.S. manufacturing company operating a subsidiary in an LDC (less developed country) shows
the following results:
a. Calculate partial labour and capital productivity figures for the parent and subsidiary. DO
the results seem misleading?
b. Compute the multifactor productivity figures for labour and capital together. Are the
results better?
c. Calculate raw material productivity figures (units/$ where $1 = FC 10). Explain why these
figures might be greater in the subsidiary.
10. A fast-food restaurant serves hamburgers. cheeseburgers, and chicken sandwiches. The restaurant
counts a cheeseburger as equivalent to 1.25 hamburgers and chicken sandwiches as 0.8
hamburger. Current employment is five full-time employees who work a 40-hour week. If the
restaurant sold 700 hamburgers, 900 cheeseburgers, and 500 chicken sandwiches in one week,
what is its productivity? What would its productivity have been if it had sold the same number of
sandwiches (2,100) but the mix was 700 of each type?
11. As operations manager, you are concerned about being able to meet sales requirements in the
coming months. You have just been given the following production report.
Find the average monthly productivity (units per hour).
12. Sailmaster makes high-performance sails for competitive windsurfers. Below is information about
the inputs and outputs for one model, the windy 2000.
2
Calculate the productivity in sales revenue/labour expense.
13. Acme Corporation received the data below for its rodent cage production unit. Find the total
productivity.
14. Various financial data for 2007 and 2008 follow. Calculate the total productivity measure and the
partial measures for labour, capital, and raw materials for this company for both years. What do
these measures tell you about this company?
15. An electronics company makes communications devices for military contracts. The company just
completed two contracts. The navy contract was for 2,300 devices and took 25 workers two weeks
(40 hours per week) to complete. The army contract was for 5,500 devices that were produced by
35 workers in three weeks. On which contract were the workers more productive?
16. A retail store had sales of $45,000 in April and $56,000 in May. The store employs eight full-time
workers who work a 40-hour week. In April the store also had seven part-time workers at 10 hours
per week, and in May the store had nine part-timers at 15 hours per week (assume four weeks in
each month). Using sales dollars as the measure of output, what is the percentage change in
productivity from April to May?
17. A parcel delivery company delivered 103.000 packages in 2007, when its average employment
was 84 drivers. In 2008 the firm handled 112,000 deliveries with 96 drivers. What was the
percentage change in productivity from 2007 to 2008?
18. The Big Black Bird Company (BBBC) has a large order for special plastic-lined military uniforms
to be used in an urgent military operation. Working the normal two shifts of 40 hours, the BBBC
production process usually produces 2500 uniforms per week at a standard cost of $120 each.
3
Seventy employees work the first shift and 30 the second. The contract price is $200 per uniform.
Because of the urgent need, the BBBC is authorized to use around-the clock production, six days
per week. When each of two shifts works 72 hours per week, production increases to 4000
uniforms per week but at a cost of $144 each.
a) Did the productivity ratio (in monetary terms) increase, decrease, or remain the same? If it
changed, what percentage did it change?
b) Did the labour productivity ratio increase, decrease, or remain the same? If it changed, by
what percentage did it change?
c) Did weekly profits increase, decrease, or remain the same?
19. Mance Fraily, the Production Manager at Ralts Mills, can currently expect his operation to
produce 1000 square yards of fabric for each ton of raw cotton. Each ton of raw cotton requires 5
labour hours to process. He believes that he can buy better quality raw cotton, which will enable
him to produce 1200 square yards per ton of raw cotton with the same labour hours.
What will be the impact on productivity (measured in square yards per labour-hour) if he
purchases the higher quality raw cotton?
20. C. A. Ratchet, the local auto mechanic, finds that it usually takes him 2 hours to diagnose and fix a
typical problem. What is his daily productivity (assume an 8 hour day)?
Mr. Ratchet believes he can purchase a small computer trouble-shooting device, which will allow
him to find and fix a problem in the incredible (at least to his customers!) time of 1 hour. He will,
however, have to spend an extra hour each morning adjusting the computerized diagnostic device.
What will be the impact on his productivity if he purchases the device?
21. Natalie Attire makes fashionable garments. During a particular week employees worked 360 hours
to produce a batch of 132 garments, of which 52 were ‘seconds’ (meaning that they were flawed).
Seconds are sold for $90 each at Attire’s Factory Outlet Store. The remaining 80 garments are sold
to retail distribution, at $200 each. What is the labour productivity ratio of this manufacturing
process?
22. Mance Fraily, the Production Manager at Ralts Mills, can currently expect his operation to
produce 1000 square yards of fabric for each ton of raw cotton. Each ton of raw cotton requires 5
labour hours to process. He believes that he can buy a better quality raw cotton, which will enable
him to produce 1200 square yards per ton of raw cotton with the same labour hours.
What will be the impact on productivity (measured in square yards per labour-hour) if he
purchases the higher quality raw cotton?
23. Joanna French is currently working a total of 12 hours per day to produce 240 dolls. She thinks
that by changing the paint used for the facial features and fingernails that she can increase her rate
to 360 dolls per day. Total material cost for each doll is approximately $3.50; she has to invest $20
in the necessary supplies (expendables) per day; energy costs are assumed to be only $4.00 per
day; and she thinks she should be making $10 per hour for her time.
 Viewing this from a total (multifactor) productivity perspective, what is her productivity at
present and with the new paint? (assumption: paint costs the same amount)
 How would total (multifactor) productivity change if using the new paint raised Ms. French’s
material costs by $0.50 per doll?
 If she uses the new paint, by what amount could Ms. French’s material costs increase without
reducing total (multifactor) productivity?
24. Last week employees at Bluegill produced 46 chairs after working a total of 200 hours. Of the 46
chairs produced, 12 were damaged due to a problem with the new sanding machine. The damaged
chairs can be discounted and sold for $25 each. The undamaged chairs are sold to a department
store retail chain for $70 each. What was the labour productivity ratio for last week? If labour
productivity was $15 in sales per hour the previous week, what was the change in labour
productivity?
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25. Yesterday, the employees at Stix produced 46 chairs. Of the 46 chairs produced, 12 were
damaged due to a problem with a new sanding machine. The damaged chairs can be discounted
and sold for $25 each. The undamaged chairs are sold to a retail chain for $70 each. Labor costs
were $720, material costs were $460, and overhead costs were $500. What was the multi-factor
productivity?
26. Max’s Performance Auto modifies 375 autos per year. The owner, Max Magee, is interested in
obtaining a measure of overall performance. He has asked you to provide him with a multi-factor
measurement of last year’s performance as a benchmark for future comparison. You have
assembled the following data. Resource inputs were: labor, 10,000 hours; 300 engine
modification kits; 200 suspension kits; and energy, 100,000 Kilowatt-hours. Average labor cost
last year was $20 per hour, engine kits cost $1,500 each, suspension kits cost $1,000 each, and
energy costs were $3 per Kilowatt-hour. What do you tell Max?
27. A company has introduced a process improvement that reduces processing time for each unit so
that output is increased by 25% with less material but one additional worker required.
Under the old process, five workers could produce 60 units per hour. Labor costs are $12/hour,
and material input was $16/unit. For the new process, material is now $10/unit. Overhead is
charged at 1.6 times direct labor cost. Finished units sell for $31 each.
a) Compute single factor productivity of labor in the old system. (Compute it in four possible
ways.)
b) Compute all factor productivity for both old and new systems.
Factor
Output
# of workers
Worker cost
Material
Overhead
Price
Old System
60
5
$12/hr
$16/unit
1.6(labor cost)
31
New System
60(1.25) = 75
6
$12/hr
$10/unit
1.6(labor cost)
31
28. A milk factory seeks advice from an external consulting company concerning its business and
production processes. The final consulting report describes several steps to increase productivity
including implementation of cutting-edge processing techniques through more powerful filtering
systems.
ExistingSyst
ProposedSystem
em
Workers
12
9
MilkOutp
1,000 gallons
1,400 gallons
$12
$12
$120
$170
ut/hour
Wage
Rate/hour
FiltrationC
ost/hour
a) Calculate the labor productivity for the existing as well as the proposed system.
b) Find the All-Factor Productivity for both systems.
c) Assume that current processing includes 700 gallons of Grade-A milk sold at $2.40/gallon
and 300 gallons of Grade-B milk at $1.90/gallon. Furthermore, assume that under the
proposed system, processing will include 600 gallons of Grade-A milk at $2.40/gallon
and 400 gallons of Grade-B milk at $1.90/gallon. Compare all-factor productivity for both
the existing and the new system.
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29. Argo Company has a large order for had-made chairs. Working the normal two shifts of 40 hours,
Argo usually produces 2500 chairs per week at a standard cost of €120 each. Seventy employees
work the first shift, and 30 employees work the second shift. The contract price is €200 per chair.
Because of the urgent need, Argo is authorized to use around-the-clock production, six days per
week. When each of the two shifts works 72 hours per week, production increases to 4000 chairs
per week but at a cost of €144 each.
 Did the multifactor productivity ratio increase, decrease, or remain the same? If it changed, by
what percentage did it change?
 Did the labour productivity ratio increase, decrease, or remain the same? If it changed, by
what percentage did it change?
 Did weekly profits increase, decrease, or remain the same?
30. Την προηγούμενη βδομάδα η παραγωγή της εταιρείας επίπλων Neonakis A.E., δουλεύοντας 200
ώρες τις παρήγαγε 46 καρέκλες. Απ’ αυτές οι 12 παρουσίασαν κάποιο μικρό πρόβλημα λόγω
προβλήματος σε κάποια μηχανή. Οι προβληματικές αυτές καρέκλες αποφασίστηκε να πωληθούν
προς €25 η κάθε μια, όταν φυσιολογικά η τιμή τους είναι €70 η μία. Ποια ήταν η παραγωγικότητα
των εργαζομένων την προηγούμενη βδομάδα? Αν η παραγωγικότητα των εργαζομένων ήταν €15
για κάθε ώρα, ποια είναι η αλλαγή στην παραγωγικότητα των εργαζομένων? [Από €15 έπεσε στο
€13.4, άρα έχουμε μια ελάττωση της τάξεως του 10.67%]
31. Suds and Duds Laundry washed and pressed the following numbers of dress shirts per week.
Week
Work Crew
Hours Shirts
1
Sud and Dud
24
68
2
Sud and Jud
46
130
3
Sud, Dud, and Jud
62
152
4
Sud, Dud, and Jud
51
125
5
Dud and Jud
45
131
a. Calculate the labour productivity ratio for each week.
b. Explain the labour productivity pattern exhibited by the data.
32. Compact disk players are produced on an automated assembly line. The standard cost of compact
disc players is €65 per unit (labour €5; materials, €20; and overhead, €40). The €5 labour cost
comes from 15 minutes of labour per CD player, valued at €20 per hour. The sales price is €100
per unit. (a) Compute the labour productivity, (b) Compute the value-added labour productivity.
 To achieve a 10% multifactor productivity improvement by reducing materials costs only, by
what % must those costs be reduced?
 To achieve a 10% multifactor productivity improvement by reducing labour costs only, by
what % must those costs be reduced?

To achieve a 10% multifactor productivity improvement by reducing overhead costs
only, by what % must those costs be reduced?
33. Drop Inn is an economy motel in western South Dakota that serves the Black Hills area. They
have 45 rooms for rent. Some of the rooms have luxury features and are more expensive and the
Inn participates in several discounting programs. Below is a table of single night room rentals in
various amounts. The number rented is for the month just finished.
Quantity Renenue (price charged)
162
€29,95
78
€32,95
205
€35,45
314
€39,95
82
€45,95
37
€49,95
45
€59,95
The motel has a crew of 7 employees who worked the following number of hours at the given
wage.
Arvin
200
€4.065 note, on salary, this is wage per month
6
Tom
Joice
Stephanie
Debbie
Carl
Pat
112
97
52
47
42
34
€11,50
€12,50
€7,50
€7,50
€6,15
€5,45
per hour
per hour
per hour
per hour
per hour
per hour
Other expenses were:
Utilities
€3.678
Supplies
€1.782
Depreciation
€5.900
What was the multifactor productivity for the Drop Inn last month?
34. A crew of 3 workers can unload the luggage on an airplane and place it on the pickup conveyor in
a total of 14 minutes, start to finish. The average number of items of luggage per plane is 92.
 What is the time for the crew to unload the plane?
 What is the rate at which the crew unloads planes?
 What is the unload time for the crew expressed per luggage item?
 What is the unload time per luggage item per crew member assuming that the work is evenly
divided among the 4 workers?
35. Collins Little Company has a stuff of 4, each working 8 hours per day (for a payroll cost of € 640 /
day) and overhead expenses of € 400 / day. Collins processes and closes on 8 titles each day. The
company recently purchased a computerized title search system that will allow the processing of
14 titles per day. Although the staff, their works hours, and pay will be same, the overheads
expenses are now € 800 per day.
36. Sergio Farmerson makes billiard balls in his famous Boston plant. With recent increases in his
costs, he has a new-found interest in efficiency. Sergio is interested in determining the
productivity of his organisation. He would like to know if his organisation 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
This Year
Units produced
1 000
1 000
Labour (hours)
300
275
Resin (kgs)
50
45
Capital invested (€)
10 000
11 000
Energy (kw)
3 000
2 850
a. Show the productivity change for each category and then determine the improvement for
labour hours, the typical standard for comparison.
b. Sergio determines his cost to be as follows:
 Labour
10 €/hour
 Resin
5 €/kg
 Capital
1% per month of investment
 Energy
0.50 €/kw
Show the productivity change, for one month last year versus one month this year, on a
multifactor basis with money units (€) as the common denominator.
37. The manager of a carpet store is trying to determine optimal installation crew size. He has tried
various crew sizes with the results shown below. Compute the average labour productivity for
each crew size. Which crew size do you recommend?
Crew Size
Meters Installed
2
706
4
1 308
3
1 017
7
3
4
2
1 002
1 288
692
The weekly output of a production process is shown below, together with data for labour and material
inputs. The standard inventory value of the output is 125 €/unit. Overhead is charged weekly at the
rate of 1500 € plus 0.5 times direct labour cost.
Assume a 40-hr/ week and an hourly wage of 16 €. Material cost is 10 € per running meter. Compute
the average multi-factor productivity for this process.
Week
Output
# workers
Material (meters)
1
412
6
2840
2
364
5
2550
3
392
5
2720
4
408
6
2790
38. A company has introduced a process improvement that reduces processing time for each unit, so
that output increased by 25% with less material, but one additional worker required.
Under the old process, five workers could produce 60 units/ hours. Labour costs are 12 €/ hours,
and Material costs (input) was previously 16 €/unit. For the new process, material is now 10 € /
unit. Overhead is charged at 1.6 times direct labour cost. Finished units sell for 31 € each. What
increase in productivity is associated with the process improvement?
39. Suzan has a part-time “cottage industry” producing seasonal plywood yard ornaments for resale at
local craft fairs and bazaars. She currently works a total of 4 hours per day to produce 10
ornaments.
a) What is her productivity?
b) She thinks that by redesigning the ornaments and switching from use of wooden glue to a hotglue gun she can increase her total production to 20 ornaments per day. What is her new
productivity?
c) What is her percentage increase in productivity?
40. Suzan’s Ceramics spent 3000 € on a new kiln last year, in the belief that it would cut energy usage
25% over the old kiln. This kiln is an oven that turns “green ware” into finished pottery. Suzan is
concerned that the new kiln requires extra labour hours for its operation. Suzan wants to check the
energy savings of the new oven and also to look other measures of their productivity to see if the
change really was beneficial. Suzan has the following data to work with:
Last Year
This year
Production (finished units)
4 000
4 000
Green ware(kgs)
5 000
5 000
Labour (hours)
350
375
Capital (€)
15 000
18 000
Energy (kWh)
3 000
2 600
Were the modifications beneficial?
41. The output of a process is valued at €100 per unit. The cost of labour is €10 per hour invluding
benefits. The accounting department provided the following information about the process for the
past four weeks:
Week 1
Week 2
Week 3
Week 4
Units produced
1124
1310
1092
981
Labour, €
12735
14842
10603
9526
Material, €
21041
24523
20442
18364
8
Overhead, €
8992
10480
8736
7848
Use the total factor productivity ratio to see whether recent improvements had any effect and,
if so, when the effect was noticeable
 Has labour productivity changed? Use the labour productivity ratio to support your answer.

42. David Upton is President of Upton Manufacturing, a producer of Go-Kart tires. Upton makes 1000
tires per day with the following resources:
Labor: 400 hours @ $12.50 per hour
Raw material: 20,000 pounds per day @ $1 per pound
Energy: $5,000 per day
Capital: $10,000 per day
(a) What is the labor productivity for these tires at Upton Manufacturing?
(b) What is the multifactor productivity for these tires at Upton Manufacturing?
(c) What is the percent change in multi-factor productivity if Upton can reduce the energy bill by
$1,000 without cutting production or changing any other inputs?
43. Lake Charles Seafood makes 500 wooden packing boxes for fresh seafood per day, working in
two 10-hour shifts. Due to higher demand, plant managers have decided to operate three eighthour shifts instead. The plant is now able to produce 650 boxes per day. Calculate the company’s
productivity before the change in work rules, and after the change. What is the percentage increase
in productivity?
A. Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and
excellent location, demand has increased by 25% in the last year. On far too many occasions,
customers have not been able to purchase the bread of their choice. Because of the size of the
store, no new ovens can be added. As a staff meeting, one employee suggested ways to load the
ovens differently so that more loaves of bread can be baked at one time. This new process will
require that the ovens be loaded by hand, requiring additional manpower. This is the only thing to
be changed. If the bakery makes 1,500 loaves per month with a labor productivity of 2.344 loaves
per labor-hour and each worker works 160 hours per month, how many workers will Lackey need
to add?
B. After reading the information above, note that the pay will be $8 per hour for employees. Charles
Lackey can also improve the yield by purchasing a new blender. The new blender will mean an
increase in his investment. This added investment has a cost of $100 per month, but he will
achieve the same output (an increase to 1,875) as the change in labor hours. Which is the better
decision?
 Show the productivity change, in loaves per dollar, with an increase in labor cost (from 640 to
800 hours).
 Show the new productivity, in loaves per dollar, with only an increase in investment ($100 per
month more).
 Show the percent productivity change for labour and investment.
C. If Charles Lackey’s utility costs remain constant at $500 per month, labour at $8 per hour, and
cost of ingredient at $0.35 per loaf, but Charles does not purchase the blender suggested above,
what will the productivity of the bakery be? What will be the percent increase or decrease?
9
CHEMICALS CORP.
Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his
quarterly report which is to include a productivity analysis for his department. One of the inputs is
production data prepared by Sharon Walford, his operations analyst. The report, which she gave him
this morning, showed the following:
2000
2001
Production (units)
4,500
6,000
Raw Material Used (barrels of petroleum by-products) 700
900
Labor Hours
22,000
28,000
Capital Cost Applied To The Department (€)
375,000 620,000
Bob knew that his labor cost per hour had increased from an average of $13.00 per hour to an average
of $14.00 per hour, primarily due to a move by management to become more competitive with a new
company that had just opened a plant in the area. He also knew that his average cost per barrel of raw
material had increased from $320 and $360. He had concern about the accounting procedures that
increased his capital cost from $375,000 and $620,000, but earlier discussions with his boss suggested
that there was nothing that could be done about that allocation.
Bob wondered if his productivity had increased at all. He called Sharon into the office and conveyed
the above information to her and asked her to proceed with preparing this part of the report.
DISCUSSION QUESTIONS
1. Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis of
productivity inputs for all factors, as well as a multifactor analysis for both years with the change
in productivity (up or down) and the amount noted.
2. The producer price index had increased from 120 to 125 and this fact seemed to indicate to Mr.
Richards that his costs are too high. What do you tell him are the implications of this change in the
producer price index?
3. Management’s expectation for departments such as Mr. Richards’ is an annual productivity
increase of 5%. Did he reach this goal?
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