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Productivity Improve Productivity, Reduce Costs, Improve Profits

Productivity Improve Productivity, Reduce Costs, Improve Profits. Productivity. Productivity, numerically defined:. (i) Total Factor Productivity (TFP) = Pt = Ot/(L+C+R+Q). Pt = Total factor Productivity Ot = Total output (sales value £) L = Labour Input factor (£)

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Productivity Improve Productivity, Reduce Costs, Improve Profits

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  1. ProductivityImprove Productivity, Reduce Costs, Improve Profits

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

  3. Productivity • QUESTION • Calculate the productivity for the following operations: • Three employees process 600 insurance policies in a week. They work 8 hours/day, 5 days/week. • 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.

  4. 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

  5. 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. • What is the miltifactorProductivity ratio? • If the staff works an average of 310 person-hours per week for the eight weeks of the summer season, what is the laborproductivity ratio on an hour basis?

  6. 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 • multifactorProductivity= 98,700/195,100 = 0.51 • laborproductivity = 98,700/[8x310] = €39.8/hr

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