Question

1. A company has gathered the following financial information for itself and a competing firm. It wants to compare productivity for the two firms (all numbers in 000s). Labor Plant and equipment Energy Materials Sales Firm A 530,000 200,000 17.500 200,000 1,200,000 Firm B $16,000 150,000 20,500 180,000 900,000 Compute partial and total factor productivity measures for Firms A and B. b. What is the picture you get of the two firms? c. What would you suggest to the management of Firm B? 2. For the firms in Problem 1. you have been asked to make a report to the management of Firm A. What are some of the caveals relating to accounting practices would you include in the report? Which num. bers should be interpreted cautiously? 3. For the data in Problem I suppose that Firm Bis a foreign firm. What additional caveats would you place on interpretation of the data?

Answer 1

Please find below table useful to compute desired results: -

А 1 Particulars 2 Labor 3 Pland and equipment 4 Energy 5 Materials 6 Sales Firm A 30000 200000 17500 200000 1200000 Firm B 16000 150000 20500 180000 900000 7 Partial Factor Productivity 9 Productivity Firm A Firm B 10 Labor =B6/B2 =C6/C2 11 Plant and equipment =B6/B3 =C6/C3 12 Energy =B6/B4 1=C6 C4 13 Material =B6/B5 1=C6 C5 14 Total Factor Productivity =B6/SUM(B2:B5) 1=C6/SUM(C2:C5)

End results would be as follows: -

А 1 Particulars 2 Labor 3 Pland and equipment 4 Energy 5 Materials 6 Sales Firm A 30,000 200,000 17.500 200.000 1,200,000 Firm B 16,000 150,000 20.500 180.000 900,000 8 Partial Factor Productivity 9 Productivity Firm A 10 Labor 40.00 11 Plant and equipment 6.00 12 Energy 68.57 13 Material 6.00 14 Total Factor Productivity 2.68 Firm B 56.25 6.00 43.90 5.00 2.46

b. Firm A has better total partial factor productivity you can see and compare it from the table above that in individual factor productivity firm B has advantage in terms of labor and plant and equipment.

c. Firm B is advised to use factors efficiently which increases the factor productivity in case of factors other than labor or may increase sales .

Please ask multiple questions separately