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.

Expert Answer

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

1) Productivity change for each category –

Productivity = Output / Input

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.

	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	$euro$ 54,500	$euro$ 59,175

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

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

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

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