Productivity Improve Productivity, Reduce Costs, Improve Profits.

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Presentation transcript:

Productivity Improve Productivity, Reduce Costs, Improve Profits

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 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, = = 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, 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 = 195,100 1.multifactor Productivity= 98,700/195,100 = labor productivity = 98,700/[8x310] = €39.8/hr Productivity