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Calculating the CPI for a single item Where 1 is usually the comparison year and CPI1 is usually an index

of 100. Alternatively, the CPI can be performed as . The "updated cost" (i.e. the price of an item at a given year, e.g.: the price of bread in 2010) is divided by the initial year (the price of bread in 1970), then multiplied by one hundred.[2] Calculating the CPI for multiple items Example: The prices of 95,000 items from 22,000 stores, and 35,000 rental units are added together and averaged. They are weighted this way: Housing: 41.4%, Foo d and Beverage: 17.4%, Transport: 17.0%, Medical Care: 6.9%, Other: 6.9%, Appare l: 6.0%, Entertainment: 4.4%. Taxes (43%) are not included in CPI computation.[3 ] Weighting How is the CPI calculated? The CPI is a product of a series of interrelated samples. First, using data from the 1990 Census of Population, BLS selected the urban areas from which data on prices were collected and chose the housing units within each area that were eli gible for use in the shelter component of the CPI. The Census of Population also provided data on the number of consumers represented by each area selected as a CPI price collection area. Next, another sample (of about 14,500 families each year) served as the basis for a Point-of-Purchase Survey that identified the pla ces where households purchased various types of goods and services. Group incentive scheme In circumstances where tasks are necessarily interdependent (such as assembly li nes) group incentive schemes rather than those which offer rewards to individual s may be set up. These schemes generally give incentives on the basis of profits earned or cost savings against estimated costs. Where group performance can be measured, group members believe they can affect performance and if a culture of participation exists such schemes can be beneficial. However, changes in any variables which affect group productivity, such as the i ntroduction of new technologies, changes in the product mix and changes in work methods, may become more difficult to introduce if workers perceive such changes as having a negative impact on their ability to meet performance targets. PERFORMANCE Individual Incentives who is motivated by money is theoretically in "busi Since each direct labor employee ness for him/her self" there should be a strong inducement for high performance. A piece work operator could care less about a fellow operator s performance. The re lative productivity of each individual can be readily determined. Likewise, actu al time spent on specific jobs is also easily determined and standards set. Indi vidual incentives work best on singularity of product and long runs. They lose t heir effectiveness and are usually costly to maintain in a high style, fast in-p rocess turnover environment. Group Incentives Group incentives attempt to empower people and tend to have a leveling effect on labor s performance. Rather than restrict production, the group pressures the super ior producer to handle more job assignments. Group pressures may likewise have a n upward leveling effect upon the operator who would be satisfied with relativel y low individual earnings. Therefore, average group output often is higher than average individual output. EARNINGS Individual Incentives If the standards are "fair" each individual is rewarded according to his/her own output. Low earnings on the part of one operator does not affect the earnings o f others. Earnings by the day, order, or lot are readily determined. Individual piecework plans traditionally employ an "engineering" staff of to keep the pay p lans balanced and current. Group Incentives Peer pressure is harnessed and earnings are vote consistent, since all members o

f a group share equally in the bonus. Objective records of individual production are often not readily available. Individual hourly rates may be adjusted on the basis of periodic merit ratings by the group leader, individual records for tem porary periods or work-sampling studies, or excessive goal attainments. Meeting various production criteria forms the basis for Merit pay plans. Empowered group s tend to offer more valid suggestions on ways to overcome production issues and usually pressure management continuously until the issues are resolved. Another added benefit is that companies who have successfully moved towards various gro up incentives have ultimately been able to downsize their overhead labor. QUALITY Individual Incentives Frustrated and unknowing employees like to try to beat the system and see what s ub-standard work they can pass though and not get caught. When found. defective work penalizes only the person responsible. If however, several persons are perf orming the same operation and necessary identification controls are lacking, qua lity may be difficult to enforce and the company may have to absorb the cost of rework. Group Incentives Peer pressure will rapidly straighten out any employee s bad attitude. The group onl y gets paid for quality production at the end of the line. Defective work penali zes all members of the group causing all group members become inspectors. Qualit y standards are simpler to enforce since it is usually easier to identify the gr oup responsible for defective work than to fix responsibility upon an individual . MORALE Individual Incentives Significant inconsistencies in earnings; supervisors who distribute "good" work to their picks or favorites; "good" versus "bad" piece rates etc. lead to contro versies, lowered morale and . . .

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