Documente Academic
Documente Profesional
Documente Cultură
ACaseStudyPresentedto
Mr.RomiReyes
DecisionScienceDepartment
RamonV.delRosarioCollegeofBusiness
Inpartialfulfillmentofthecourserequirements
forOPEMANAK31
Abalos,Elika
Balila,Richmond
Romero,Regina
Tamayo,Philip
Yabut,Sage
Yu,Andrea
01June2016
I.
BackgroundInformation
2006
Production(units)
Rawmaterialused(barrelsofpetroleumbyproducts)
Laborhours
Capitalcostappliedtothedepartment($)
2007
4,500
6,000
700
900
22,000
28,000
$375,000
$620,000
II.
ProblemStatement
III.
AnalysisofCaseData
ProductiveAnalysis
2006
2007
AdjustedCost
AdjustedTotal
Cost
Production(units)
4,500
6,000
MaterialUsed
700
900
MaterialCost
$320
$360
$345.60
$311,040
LaborHours
22,000
28,000
LaborCost
$13
$14
$13.44
$376,320
CapitalApplied($)
$375,000
$620,000
$595,198.10
$595,198.10
ProducePriceIndex(PPI)
120
125
$1,282,558.10
TOTALCOST
$1,282,558.10
*ProducePriceIndex=(125/120=1.04167)
IV.
Recommendation
The group recommends that Mr. Richards should improve overall operations
maintenance. Managing the number of loops or processes/repetitions an operator/laborer
handles can mean a lot of savings or increase inproductivityin thelongrun.Iflaborerswereto
be given an increase in production quotas, the company may be able to get more from them
with the same price. But of course, an increase in required output will also need additional
compensation. This may be given in the form of indirect monetary incentives. These can be
given in many forms like access to VIP Food in the mess, or Free Merienda, or even
establishing an Employee of the Month system to increase the laborers willingness to strive
hardforthedepartment.
V.
DiscussionQuestions
1. PreparetheproductivitypartofthereportforMr.Richards.Heprobablyexpects
someanalysisofproductivityinputsforallfactors,aswellasmultifactoranalysis
forbothyearswiththechangeinproductivity(upordown)andtheamountnoted.
AccordingtoStevensonandCheeChuong(2010),productivityisameasureoftheeffective
useofresources,usuallyexpressedastheratioofoutputtoinput.
Computingfortheproductivity,wehave:
Productivityfor2006
Productivity=Output/Input
Output=4,500productionunits
RawMaterialsInput=$320perbarrelx700barrelsofpetroleumbyproducts
=$224,000
LaborInput=$13labourcostperhourx22,000labourhours
=$286,000
CapitalInput=$375,000
MultifactorProductivity=Output/Input
=4,500units/($224,000+$286,000+$375,000)
=4,500units/$885,000
=0.005084745763unitsperdollarinput
Productivityfor2007
Productivity=Output/Input
Output=6,000productionunits
RawMaterialsInput=$360perbarrelx900barrelsofpetroleumbyproducts
=$324,000
LaborInput=$14labourcostperhourx28,000labourhours
=$392,000
CapitalInput=$620,000
MultifactorProductivity=Output/Input
=6,000units/($324,000+$392,000+$620,000)
=6,000units/$1,336,000
=0.00491017964unitsperdollarinput
Productivitygrowth=[(currentproductivitypreviousproductivity)/previousproductivity]x100
=[(0.004910179640.005084745763)/0.005084745763]x100
=x100
Productivitygrowth=11.67664671%
Therefore,thereisa11.68%decreaseinproductivityfrom2006to2007.
MultiFactor
Productivity
Analysis
2006
2007
%Change
LaborProductivity
4,500/22,000=
0.02454545
6,000/28,000=
0.21428571
4.79%positive
change
MaterialProductivity
4,500/700=
6.42857142
6,000/900=
6.6666667
3.70%positive
change
CapitalProductivity
4,500/$375,000=
0.0120
6,000/$620,000=
0.0097
19.17%negative
change
Intheanalysisofproductivityinputsforallfactors,laborproductivityandmaterialproductivity
increased.However,capitalproductivitydeclined.
2. Theproducerpriceindexhadincreasedfrom120to125,andthisfactseemedto
indicatetoMr.Richardsthathiscostsweretoohigh.Whatdoyoutellhimarethe
implicationsofthischangeintheproducerpriceindex?
ChangeinProducerPriceIndex(PPI)=[(125120)/120]x100
=4.1667%
There is a 4.1667% increase in the PPI. This means that even though productivity has
increased from 2006 to 2007, the cost per unit of materials used and labor hours are higher in
2007thanin2006.Also,thiswouldresultintoanincreaseinthepriceforconsumersin2007.
3. ManagementsexpectationfordepartmentssuchasMr.Richardsisanannual
productivityincreaseof5%.Didhereachthisgoal?
2008
2009
MFPbefore
adjustment
0.00508
0.00449
(0.004490.00508)/
0.00508=11.61%
MFPafter
adjustment
0.00508
0.00468
(0.004680.00508)/
0.00508=7.88%
The goal was not reached. Although labor and materials productivity is favorable, multifactor
productivity was not positive even after adjusting the variables for inflation. It has fallen by
11.61%beforeadjustmentandby7.88%aftertheadjustmentforinflation.