# Productivity Improve Productivity Reduce Costs Improve Profits Productivity

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Productivity Improve Productivity, Reduce Costs, Improve Profits

Productivity, numerically defined: (i) Total Factor Productivity (TFP) = Pt = Ot/(L+C+R+Q) Pt Ot L C R Q = Total factor Productivity = Total output (sales value £) = Labour Input factor (£) = Capital Input factor (£) = Raw materials/ purchased parts (£) = Other miscellaneous services (£) (ii) Partial Factor Productivity (PFP) = Ot/ L or C or Ot/ a combination of inputs

Productivity QUESTION Calculate the productivity for the following operations: 1. Three employees process 600 insurance policies in a week. They work 8 hours/day, 5 days/week. 2. A team of workers make 400 units of a product, which is valued by its standard cost of € 10 each (before markups for other expenses and profit). The accounting department reports that for this job the actual costs are € 400 for labor, € 1, 000 for materials, and € 300 for overhead.

Productivity ANSWER Policies processed Partial [LABOUR] Productivity = ------------Employee hours 600 policies --------------------- = 5 policies/h [3 employees) x [40 h/employee] Quantity at standard cost Multifactor Productivity = --------------------------Labor cost + Materials cost + Overheads [400 units] x [€ 10/unit] € 4, 000 --------------- = 2. 35 € 400 + € 1, 000 + € 300 € 1, 700

Productivity QUESTION A state owned transportation company charges € 18 per ticket, plus a € 3 surcharge to fund planned equipment. It expects to sell 4, 700 tickets during the eight week summer season. During that period, the service will experience € 110, 000 in labor costs. Materials required for each passage sold (tickets, a tourist-information sheet, and the like) cost € 1. 3. Overhead during the period comes to € 79, 000. 1. What is the miltifactor Productivity ratio? 2. If the staff works an average of 310 person-hours per week for the eight weeks of the summer season, what is the labor productivity ratio on an hour basis?

Productivity ANSWER OUTPUT Multifactor Productivity = -------INPUT Tickets sold = 4, 700 Price = € 18 value of the output=4, 700 x [18+3]= 98, 700 Surcharge = € 3 Labor cost = € 110, 000 Materials costs = € 1. 3 value of the input = 110, 000 + [1. 3 x 4, 700] + Overheads = € 79, 000 + 79, 000 = 195, 100 1. multifactor Productivity= 98, 700/195, 100 = 0. 51 2. labor productivity = 98, 700/[8 x 310] = € 39. 8/hr