PRODUCTIVITY EXERCISE

A company that makes shopping carts for supermarkets and other stores
recently purchased some new equipment that reduces the labor content of
the jobs involved in producing the shopping carts. Prior to buying the new
equipment, the company used five workers, who produced an average of
60 carts per hour. Hourly wage per worker was P45 and machine cost was
P180 per hour. With the new equipment, it was possible to transfer one of
the workers to another department, and machine cost increased by P45 per
hour while output increased by four carts per hour.
1. Tabulate the given and calculated data on the table below.
2. Compute the labor productivity under each system (before and after
purchase and use of new equipment). Use carts per worker per hour
as the measure of labor productivity.
3. Compute the multifactor productivity under each system. Use carts
per peso cost (labor + machine) as the measure.
4. Comment on the changes in productivity according to the two measures.
5. Which of the two measures (a) labor productivity or (b) multifactor
productivity is the more pertinent for this situation? Explain.
Before Equipment
Purchase
Output, carts/hour
Input:
Labor, number of workers
Machine, P cost per hour
Labor productivity,
carts/worker/hour
Multifactor (L+M) productivity,
carts / P cost

After Equipment
Purchase