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:

Month	Labor Expense			Number of Projects			Sales Dollars
1	$	21,310			44		$	21,090
2		28,800			60			22,900
3		20,392			60			29,780
4		14,194			15			19,560
5		14,926			20			22,680
6		21,592			60			22,520

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

productivity measures efficiency of a business process by dividing the total output by amount of input utilized in production process

using number of projects as a output metric and labor expense as input metric

month	labor expense	number of projects	productivity	improvement in productivity
1	21310	44	0.0022	-
2	28800	60	0.0020	-0.0002
3	20392	60	0.0029	0.0009
4	14194	15	0.0010	-0.0019
5	14926	20	0.0013	-0.0003
6	21592	60	0.0027	0.0014

using sales as output metric

month	labor expense	sales	productivity	improvement in productivity
1	21310	21090	0.9896	-
2	28800	22900	0.7951	-0.1945
3	20392	29780	1.4603	0.6652
4	14194	19560	1.37804	-0.08226
5	14926	22680	1.5194	0.14136
6	21592	22520	1.04297	-0.47643