Productivity Measurement, Technical and Allocative Efficiency, Partial Measures Carsen Company produces handcrafted pottery that uses two inputs: materials and labor. During the past quarter, 24,000 units were produced, requiring 96,000 pounds of materials and 48,000 hours of labor. An engineering efficiency study commissioned by the local university revealed that Carsen can produce the same 24,000 units of output using either of the following two combinations of inputs:
Materials Labor
Combinations:
F1 72,000 79,200
F2 36,000 33,600
The cost of materials is $8 per pound; the cost of labor is $12 per hour.
Required: 1. Compute the output-input ratio for each input of Combination F1. If required, round your answers to two decimal places.
Materials
Labor
Does this represent a productivity improvement over the current use of inputs?
What is the total dollar value of the improvement? $
Classify this as a technical or an allocative efficiency improvement.
2. Compute the output-input ratio for each input of Combination F2. If required, round your answers to two decimal places.
Materials
Labor
Does this represent a productivity improvement over the current use of inputs?
Now, compare these ratios to those of Combination F1. What has happened?
F2 has_________ productivity for materials and___________ productivity for labor.
3. Compute the cost of producing 24,000 units of output using Combination F1. $
Compare this cost to the cost using Combination F2.
Cost of Combination F1 $
Cost of Combination F2
Difference $
Does moving from Combination F1 to Combination F2 represent a productivity improvement?
Productivity Measurement, Technical and Allocative Efficiency, Partial Measures Carsen Company produces handcrafted pottery that uses two inputs: materials and labor. During the past quarter, 24,000 units were produced, requiring 96,000 pounds of materials and 48,000 hours of labor. An engineering efficiency study commissioned by the local university revealed that Carsen can produce the same 24,000 units of output using either of the following two combinations of inputs:
Materials Labor
Combinations:
F1 72,000 79,200
F2 36,000 33,600
The cost of materials is $8 per pound; the cost of labor is $12 per hour.
Required: 1. Compute the output-input ratio for each input of Combination F1. If required, round your answers to two decimal places.
Materials
Labor
Does this represent a productivity improvement over the current use of inputs?
What is the total dollar value of the improvement? $
Classify this as a technical or an allocative efficiency improvement.
2. Compute the output-input ratio for each input of Combination F2. If required, round your answers to two decimal places.
Materials
Labor
Does this represent a productivity improvement over the current use of inputs?
Now, compare these ratios to those of Combination F1. What has happened?
F2 has_________ productivity for materials and___________ productivity for labor.
3. Compute the cost of producing 24,000 units of output using Combination F1. $
Compare this cost to the cost using Combination F2.
Cost of Combination F1 $
Cost of Combination F2
Difference $
Does moving from Combination F1 to Combination F2 represent a productivity improvement?
Related questions
Carsen Company produces handcrafted pottery that uses twoinputs: materials and labor. During the past quarter, 24,000 unitswere produced, requiring 96,000 pounds of materials and 48,000hours of labor. An engineering efficiency study commissioned by thelocal university revealed that Carsen can produce the same 24,000units of output using either of the following two combinations ofinputs:
| Materials | Labor | |
| Combinations: | ||
| F1 | 72,000 | 36,000 |
| F2 | 79,200 | 33,600 |
The cost of materials is $8 per pound; the cost of labor is $12per hour.
Required:
1. Compute the output-input ratio for eachinput of Combination F1. If required, round your answers to twodecimal places.
| Materials | |
| Labor |
Does this represent a productivity improvement over the currentuse of inputs?
- Select your answer -YesNoItem 3
What is the total dollar value of the improvement?
$
Classify this as a technical or an allocative efficiencyimprovement.
- Select your answer -Allocative efficiencyTechnical efficiencyItem5
2. Compute the output-input ratio for eachinput of Combination F2. If required, round your answers to twodecimal places.
| Materials | |
| Labor |
Does this represent a productivity improvement over the currentuse of inputs?
- Select your answer -YesNoItem 8
Now, compare these ratios to those of Combination F1. What hashappened?
F2 has - Select your answer -lowerhigherItem 9 productivity formaterials and - Select your answer -lowerhigherItem 10 productivityfor labor.
3. Compute the cost of producing 24,000 unitsof output using Combination F1.
$
Compare this cost to the cost using Combination F2.
| Cost of Combination F1 | $ |
| Cost of Combination F2 | |
| Difference | $ |
Does moving from Combination F1 to Combination F2 represent aproductivity improvement?
- Select your answer -YesNoItem 15
Productivity Measurement, Technical and Price Efficiency
In 20x1, Fleming Chemicals used the following input combination to produce 55,000 gallons of an industrial solvent:
| Materials | 33,000 lbs. |
| Labor | 66,000 hrs. |
In 20x2, Fleming again planned to produce 55,000 gallons of solvent and was considering two different changes in process, both of which would be able to produce the desired output. The following input combinations are associated with each process change:
| Change I | Change II | |
| Materials | 38,500 lbs. | 27,500 lbs. |
| Labor | 44,000 hrs. | 55,000 hrs. |
The following combination is optimal for an output of 55,000 units. However, this optimal input combination is unknown to Fleming.
| Materials | 22,000 lbs. |
| Labor | 44,000 hrs. |
The cost of materials is $60 per pound, and the cost of labor is $15 per hour. These input prices hold for 20x1 and 20x2.
Required:
1. Compute the productivity profiles for each of the items listed below. If required, round the answers to two decimal places.
a. The actual inputs used in 20x1.
| 20x1 | |
| Materials | |
| Labor |
b. The inputs for each proposed 20x2 process change.
| Materials | Labor | |
| Change I | ||
| Change II |
c. The optimal input combination.
| Optimal | |
| Materials | |
| Labor |
2. Compute the cost of 20x1's productive inefficiency relative to the optimal input combination. Repeat for 20x2 proposed input changes.
| 20x1 | $ |
| 20x2 Change I | $ |
| 20x2 Change II | $ |
Compute the amount of the productivity improvement from 20x1 to 20x2 for each process change. If an amount is zero, enter "0".
| Change I | $ |
| Change II | $ |
