A number of companies use the following ratio to measure operating efficiency:...

A number of companies use the following ratio to measure operating efficiency:

Earned direct labor dollars is the number of units produced times the standard direct labor dollars per hour. For example, the machine department produced four jobs today:

Actual direct labor dollars for today total $1,350.

The higher the ratio, the more output per actual direct labor dollar. Operating managers are rewarded for high ratios.

Required:

Discuss the advantages and disadvantages of using this ratio to measure and reward the performance of factory managers.