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Productivity Calculations

Productivity Analysis Assignment
Total = 55 points: Productivity Calculation Tab (30 points) + What-If Analysis Tab (25 points) Assignment Learning Objectives
Use data in columns C & D for the
Data: Calculation Exercises 1a - 6c 1. Calculate single factor and total factor productivity measures
Metric Parent (Domestic) Subsidiary (Less Developed Country) Hint: Use Excel formulas to calculate your answer. 2. Interpret productivity measures and draw appropriate conclusions
Sales (units) 1,750,000 650,000 For Example: To calculate the Parent's total labor dollars, you multiply labor hours * labor cost 3. Use formulas in Excel
Units Produced 1,400,000 480,000 In Excel, you enter: =C7*C8 4. Use Excel to perform "What-If" Analysis
Labor (hours) 40,000 20,000 The "=" sign tells Excel that you are entering a formula and then you multiply the two cells that contain your data
Labor Cost ($) per hour $14.57 $5.52
Materials Cost ($) $400,000 $200,000
Equipment (Hours) 120,000 30,000
Equipment Cost ($) $1,359,600 $225,000
Fixed Costs ($) $2,000,000 $725,000
Selling Price per Unit $19.99 $19.99 Total points this worksheet = 30 points
Calculation Exercises:
Labor Productivity (units/hour)
1a. Compute the single-factor productivity for labor for the Parent operations in units per hour (enter your formula in cell B20).
Cell B20 must be a formula units/labor hour
1b. Compute the single-factor productivity for labor for the Subsidiary operations in units per hour (enter your formula in cell B23).
Cell B23 must be a formula units/labor hour
1c. Interpret your findings by indicating which of the two entities is more productive in terms of single-factor labor productivity in units per hour
Labor Productivity (units/$)
2a. Compute the single-factor productivity for labor for the Parent operations in units per dollar (enter your formula in cell B31).
Cell B31 must be a formula units/labor $
2b. Compute the single-factor productivity for labor for the Subsidiary operations in units per dollar (enter your formula in cell B34).
Cell B34 must be a formula units/labor $
2c. Interpret your findings by indicating which of the two entities is more productive in terms of single-factor labor productivity in units per dollar.
Materials Productivity (units/$)
3a. Compute the single-factor productivity for materials for the Parent operations in units per dollar (enter your formula in cell B42).
Cell B42 must be a formula units/$
3b. Compute the single-factor productivity for materials for the Subsidiary operations in units per dollar (enter your formula in cell B45).
Cell B45 must be a formula units/$
3c. Interpret your findings by indicating which of the two entities is more productive in terms of single-factor materials productivity in units per dollar.
Equipment Productivity (units/hour)
4a. Compute the single-factor productivity for equipment for the Parent operations in units per hour (enter your formula in cell B53).
Cell B53 must be a formula units/hour
4b. Compute the single-factor productivity for equipment for the Subsidiary operations in units per hour (enter your formula in cell B56).
Cell B56 must be a formula units/hour
4c. Interpret your findings by indicating which of the two entities is more productive in terms of single-factor equipment productivity in units per hour.
Equipment Productivity (units/$)
5a. Compute the single-factor productivity for equipment for the Parent operations in units per dollar (enter your formula in cell B64).
Cell B64 must be a formula units/$
5b. Compute the single-factor productivity for equipment for the Subsidiary operations in units per dollar (enter your formula in cell B67).
Cell B67 must be a formula units/$
5c. Interpret your findings by indicating which of the two entities is more productive in terms of single-factor equipment productivity in units per dollar.
Total-Factor Productivity:
6a. Compute the total-factor productivity (all factors) for the Parent operations in units per dollar (enter your formula in cell B75).
Cell B75 must be a formula units/$
6b. Compute the total-factor productivity (all factors) for the Subsidiary operations in units per dollar (enter your formula in cell B78).
Cell B78 must be a formula units/$
6c. Interpret your findings by indicating which of the two entities is more productive in terms of total-factor productivity in units per dollar.

What-If Analysis

Productivity Analysis Assignment
Total = 55 points: Productivity Calculation Tab (30 points) + What-If Analysis Tab (25 points)
Current Values Use column F for
Data: question 8
Metric Parent (Domestic) Subsidiary (LDC) Parent (Domestic)
Sales (units) 1,400,000 450,000 1,400,000
Units Produced 1,400,000 480,000 1,400,000
Labor (hours) 40,000 20,000 40,000
Labor Cost ($) per hour $14.57 $5.52 $14.57
Materials Cost ($) $400,000 $200,000 $400,000
Equipment (Hours) 120,000 30,000 120,000
Equipment Cost ($) $1,359,600 $225,000 $1,359,600
Fixed Costs ($) $2,000,000 $725,000 $2,000,000
Selling Price per Unit $9.99 $7.99 $9.99
What-If Productivity Values Based on New Data Entered in Column F
Measure Parent Organization
Labor Productivity (units/labor hour) 35.00
Labor Productivity (units/labor $) 2.40
Materials Productivity (units/$) 3.50
Equipment Productivity (units/hour) 11.67
Equipment Productivity (units/$) 1.03
Total-Factor Productivity (units/$) 0.32
Labor
7. Provide one possible explanation how the Parent can be more productive when considering labor productivity in units per hour, but the subsidiary is more productive in units per dollar.)
Parent Equipment Purchase (Part #1)
8. Assume purchase of new equipment at an incremental, one-time fixed cost of $1,500,000 resulting in a reduction in labor hours to 30,000, a reduction in Equipment Hours to 100,000, and a reduction of Equipment Costs to $1,248,000 with all other costs remaining the same. Change the appropriate values in column F above. Answer the questions below by comparing the new productivity value in cells D18 through D23 to the values you calculated on the "Productivity Calculations" worksheet. For example, if the value in D18 on this worksheet (Labor Productivity in units/labor hour) is less than the value for Labor Productivity in units/labor hour for the Parent operations on the "Productivity Calculations" worksheet, then choose "decreased"
Productivity Measure Choose the correct answer for each productivity calculation
Labor Productivity in terms of units/labor hour
Labor Productivity in terms of units/labor $
Materials Productivity in terms of units/Materials Cost ($)
Equipment Productivity in terms of units/hour
Equipment Productivity in terms of units/$
Total Factor Productivity in terms of units/$
Parent Equipment Purchase (Part #2)
9. Calculate Total Revenue prior to any equipment changes using data in cells C6 through C14 above. The formula for Profit is Total Revenue - Total Costs The formula for Total Revenue is Total Units Sold * Selling Price per Unit
Pre Equipment Purchase Total Profit
Post Equipment Purchase Total Profit
10. Summarize your observations concerning how the potential new equipment purchase will impact each of the productivity values and total revenue. Provide a recommendation whether to purchase the equipment and also provide supporting evidence for your recommendation.