Question

Our examples in the chapter have focused on manufacturing, where the output is units of product and the inputs are manufacturing activities or costs. The concept of productivity can be applied in a variety of settings, wherever there are inputs and outputs. For example, consider LandscapeCity, a landscape design company that specializes in small landscape projects for people living in cities. Amanda Caldwell, the assistant manager, is in the process of trying to determine if productivity has been improving since she was hired 6 months ago. Because it is a design firm, labor is the only significant expense, but Amanda is unsure if the number of projects or the dollar of sales volume should be used when computing productivity. She has collected these data for sales and labor expenses for the past 6 months: Number of Projects 47 66 Month Labor Expense $22,770 31,680 20,692 14,494 15,226 21,892 опеш мн Sales Dollars $21,390 23,200 30,080 19,860 22,980 22,820 50 Required: 1. Calculate the productivity for each month and the change in productivity from month to month using number of projects as the measure of output. 2. Calculate the productivity for each month and the change in productivity from month to month using sales dollars as the measure of output.

Answer 1

Solution:

1) Productivity numver of project as output

	Input	Output
Month	Labor expense(a)	No of projects(b)	productivity(c = b/a)	Monthly change
1	$22,770	47	0.0021
2	$31,680	66	0.0021	0.0000
3	$20,692	50	0.0024	0.0003
4	$14,494	15	0.0010	(0.0014)
5	$15,226	20	0.0013	0.0003
6	$21,892	50	0.0022	0.0009

2) productivity sales dollar as the measure of output:

	Input	Output
Month	Labor expense(a)	Sales (b)	productivity(c = b/a)	Monthly change
1	$22,770	21,390	0.9393
2	$31,680	23,200	0.7323	(0.207)
3	$20,692	30,080	1.4537	0.7214
4	$14,494	19,860	1.3702	(0.0835)
5	$15,226	22,980	1.5092	0.139
6	$21,892	22,820	1.0423	(0.4669)

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