 # Question & Answer: E. Jones Ltd, a light engineering company, wishes to know if they are maintaining the manufacturing…

E. Jones Ltd, a light engineering company, wishes to know if they are maintaining the manufacturing average of 3% increase in productivity. The data in Table Old represents a month from last year and an equivalent month this year. Calculate the productivity change for each category using the costs provided, show the productivity change on a multifactor basis with euro as the common denominator.

 Last year Now Cost Units produced 1000 1000 Labour (Hours) 300 275 10/hr Materials (Kg) 10,000 11,000 5/kg Energy (BTU) 3000 2850 0.50/BTU

1) Productivity change for each category –

Productivity = Output / Input

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So, for each category, change in the productivity has to be calculated.You cannot add the categories together because they do not share the same units.

 Last Year Now Change Labour (hours) 1000/300 = 3.33 1000/275 = 3.64 3.64 – 3.33 = 0.31 Material (000kg) 1000/10000 = 0.1 1000/11000 = 0.09 0.09 – 0.1 = -0.01 Energy (BTU) 1000/3000 = 0.33 1000/2850 = 0.35 0.35 – 0.33 = 0.02

Then for the improvement in the labour category:

0.31/3.33 = 0.093 or 9.3% improvement over last year.

2)

 Last Year Now Labour (hours) 300*10 = 3000 275*10 = 2750 Material (000Kg) 10000*5 = 50000 11000*5 = 55000 Energy (BTU) 3000*0.50 = 1500 2850*0.50 = 1425 Total Cost 54,500 59,175

Multifactor productivity for last year = 1000/54500 = 0.018 units/

Multifactor productivity for current year = 1000/59175 = 0.016 units/

Change in productivity = 0.016/0.018 = 0.088 or 8.8%