Question

QUESTION 2 -PRODUCTIVITY Fikile's Furnishers manufactures wooden tables for the local market. The production figures are show table below 2014 560 500 678 500 25 7.5 240 125 000 175 000 2015 2016 779 050 46 7.5 250 250 000 2017 1 050 225 Output Number of workers employed Working hours per day Working days per annum Material cost (R's) 30 7.5 245 260 400 000 Use labour rate of R30 per hour for years 2014 to 2017. Calculate the multifactor productivity for the years 2014 to 2017 for the above. Analyse the multifactor productivity and advise Fikile on the state of his operations What should Fikile's Furnishers do to improve productivity? 2.1 2.2 2.3 QUESTION 3 -LOCATION ANALYSIS

Answer 1

2.1:

	Year
	2014	2015	2016	2017
Output	560500	678500	779050	1050225
Number of workers employed	25	30	46	55
Working hours per day	7.5	7.5	7.5	9
Working days per annum	240	245	250	260
Material cost (R’s)	125000	175000	250000	400000
Average Hourly Rate for Worker - Not Given in the Question, however considered for the sake of Calculation	10	10	10	10
MultiFactor Productivity Formula - Output/Input	0.975	0.934	0.700	0.623
		4.16%	28.16%	36.14%
	Year
	2014	2015	2016	2017
MultiFactor Productivity Reduced with Respect to Year 2014		4.16%	28.16%	36.14%

2.2:

1	B	C	D	E	F
2		Year
3		2014	2015	2016	2017
4	Output	560500	678500	779050	1050225
5	Number of workers employed	25	30	46	55
6	Working hours per day	7.5	7.5	7.5	9
7	Working days per annum	240	245	250	260
8	Material cost (R’s)	125000	175000	250000	400000
9	Average Hourly Rate for Worker - Not Given in the Question, however considered for the sake of Calculation	10	10	10	10
10	MultiFactor Productivity Formula - Output/Input	=C4/((C8)+(C5*C6*C7*C9))	=D4/((D8)+(D5*D6*D7*D9))	=E4/((E8)+(E5*E6*E7*E9))	=F4/((F8)+(F5*F6*F7*F9))

2.2 Analyse the multifactor productivity and advise Fikile on the state of his operations.

From the above table, we can find that Multi-factor productivity for the year 2015, 2016, 2017, reduced by 4.16%, 28.16%, 36.14% over the year 2014, however output got increased for 2015, 2016 and 2017 over the year 2014, but due to increase in Material and Labor cost, Multi- factor productivity for the year 2015, 2016 and 2017 reduced,

2.3 What should Fikile’s Furnishers do to improve productivity?

As, We know that multi -factor productivity is defined as Output is divided by input, where, Output is revenue or Income generated and Inputs are labor cost and Material cost, two way Multi - Factor productivity can be increased, those are ---

• either we can increase the value of output like revenue or income for the fixed input like material and labor cost,
• or, we can reduce labor and material cost or input cost for the fixed output generated,
• thus, we should look for the option which will improve supply chain processes, increase performance of labor and create better negotiation with suppliers to bring down the material cost, if labor performance gets increased, their per hour cost can be decreased,