{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ch15HWSolutionsPlus - CHAPTER 15 PRODUCTIVITY MEASUREMENT...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 15 PRODUCTIVITY MEASUREMENT AND CONTROL EXERCISES 15–1 1. Combinations B and C are technically efficient. Combination B can produce the same output for less of each input than Combination A. Similarly, Com- bination C can produce the same output for less of each input than Combina- tion D. Comparing B and C shows that trade-offs exist among the inputs, and so it is not possible to say that B is more technically efficient than C (or vice versa). 2. Once the technically efficient input combinations are identified, then the least costly combination should be chosen. Input prices are used to value the trade-offs (B uses more materials but less labor and energy than C): Combination B: ($8 × 110) + ($10 × 180) + ($2 × 540) = $3,760 Combination C: ($8 × 92) + ($10 × 190) + ($2 × 570) = $3,776 Combination B is the best choice based on allocative efficiency. 15–2 1. Output-input ratios (Combination C1): Materials: 4,000/14,000 = 0.29 Labor: 4,000/7,000 = 0.57 Yes, there is improvement. Current productivity is: Materials: 4,000/16,000 = 0.25 Labor: 4,000/8,000 = 0.50 Since 0.29 > 0.25 and 0.57 > 0.50, Combination C1 dominates the current in- put combination, and productivity would definitely improve. Cost comparison: Current combination ($5 × 16,000) + ($10 × 8,000) $160,000 Combination C1 ($5 × 14,000) + ($10 × 7,000) 140,000 Value of productivity $ 20,000 This improvement is all attributable to technical efficiency. The same output is produced with proportionately less inputs. (Note that the inputs are in the same ratio 2:1, and that Combination C1 reduces each input in the same pro- portion). 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
15–2 Concluded 2. Output-input ratios (Combination C2): Materials: 4,000/15,000 = 0.27 Labor: 4,000/6,000 = 0.67 Compared to the current use, productivity is better for both materials and labor (0.27 > 0.25 and 0.67 > 0.50). Compared to Combination C1, however, C2 has lower productivity for materi- als (0.27 < 0.29) and higher productivity for labor (0.67 > 0.57). Trade-offs must be considered.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}