2. Solve Problem 1.5 which shows a Table of factors of production (i.e., resources or inputs) and show in detail your calculations of the old and new single-factor productivity for each resource and show the percentage by which it has gone up or down. Be sure to present the summary of your answers in a Table to your boss. The Table would look similar to what’s in the book, but with three additional columns (one after “Last Year” column, one after “Now” column, and the third to show “Change in Productivity” either increase or decrease. Also, discuss if the company’s goal for productivity is being met.
Rubric or Grading Guideline:
Complete, correct, and Logically presented Response by due date = 4 to 5 points max.
Complete, correct but with typos, not neatly presented = 3.0 to 4 points max
Answered both questions, but with some error(s) = 1.5 to 3.0 points max
Did only a half decent job of answering the questions = 0 to 1.5 points
Incomplete or No Response during Date and Time required = 0 points.
COMPUTING SINGLE-FACTOR AND MULTIFACTOR GAINS IN PRODUCTIVITY
Collins Title Insurance Ltd. wants to evaluate its labor and multifactor productivity with a new comput- erized title-search system. The company has a staff of four, each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The new computerized title-search system will allow the processing of 14 titles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.
APPROACH c Collins uses Equation (1-1) to compute labor productivity and Equation (1-2) to com- pute multifactor productivity.
SOLUTION c Labor productivity with the old system: 32 labor@hours = .25 titles per labor@hour
Labor productivity with the new system: 14 titles per day = .4375 titles per labor@hour 32 labor@hours
8 titles per day Multifactor productivity with the old system: $640 + 400 = .0077 titles per dollar
14 titles per day Multifactor productivity with the new system: $640 + 800 = .0097 titles per dollar
Labor productivity has increased from .25 to .4375. The change is (.4375 – .25)>.25 = 0.75, or a 75% increase in labor productivity. Multifactor productivity has increased from .0077 to .0097. This change is (.0097 – .0077)>.0077 = 0.26, or a 26% increase in multifactor productivity.
INSIGHT c Both the labor (single-factor) and multifactor productivity measures show an increase in productivity. However, the multifactor measure provides a better picture of the increase because it includes all the costs connected with the increase in output.
LEARNING EXERCISE c If the overhead goes to $960 (rather than $800), what is the multifactor productivity? [Answer: .00875.]
