Answered Essay: 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 euro54,500 euro59,175

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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