Question

The production data for a certain product during the last month of October 2020 were as follows:

The number of units produced and sold was 180,000. Each unit was sold at the price of BD 70. The number of workers used to produce this output was 90 where every worker of them worked a total of 250 labor hours and the wage rate per labor hour was BD 6. The total cost of raw materials used was BD 2,100,000, the cost of capital was BD 1,800,000 and the cost of energy was BD 765,000.

What is the multi-factor productivity of energy and capital for October 2020?

Answer 1

Productivity means the efficiency with which the output is produced using the given inputs for a given firm, industry or economy. It can be expressed as single factor productivity like labour productivity or multi – factor which may include some or all of the inputs.

Multi- factor productivity (MFP) is a measure of monetary performance which equates the amount of output to the amount of combined inputs used to produce that output. Combinations of inputs can include labour, capital, energy, materials, and purchased services. Thus we can say:

Formula:

Multifactor Productivity = Output/Combined Inputs

Monetary value of output = 180,000 units * BD 70 = BD 12600000

Monetary Value of Inputs ( capital + energy) = BD 1800000 + BD 765,000 = BD 2565000

Multifactor Productivity of capital and energy for October 2020 = 12600000/2565000 =4.91