Labour Productivity

System

Hiya

Me and a friend were having an argument with a lecturer today.

We were doing a question on the above subject,

"Calculate the labour productivity of each month"

Month___Units___Labour Hours___Our Answer__Hers

Jan______20________320_____________0.06_____16
Feb______25________370_____________0.07_____14.8
Mar______22________320_____________0.07_____14.6
and so on

As I'm sure you know Labour Productivity is the amount of units produced per direct working hour, and we believe we have calculated that and think she has calculated how many hours it takes to produce one unit.

She believes she is right!

Are we correct or is she, as neither of us wanted to budge on the argument!

Someone please help!!!

System

Re:Labour Productivity

The Wikipedia definition "... labour productivity is typically measured as output per worker or output per labour-hour."

http://en.wikipedia.org/wiki/Productivity

I'm not an expert on this but according to that definition, you're both right however the key word there must be "typically" meaning "not always or exclusively". You've elected to use output per hour - time based - while your lecturer has chosen output per worker/department hours - unit based. These can each be expressed as;

Labour hours/Units of output

or,

Units of output/Labour hours

In my company, if I wanted to measure labour hours against the output of manufactured windows, using the units per labour hour method would result in fractions of whole units so I'd reverse it and opt for labour hours used per unit instead since this is more material for management accounting purposes.

I'd also argue that output volumes must surely play a part (using my own figures);

* For low intensity, high volume outputs such as a highly automated factory making nappies, I'd use your interpretation e.g. 25,000 units per hour; knowing that one whole unit took 0.0004 hours to produce is immaterial.

* For high intensity, low volume outputs such as a car plant manufacturing prestige vehicles, I'd use your lecturers interpretation e.g. 250 hours per unit; knowing that one labour hour produced 0.004 units is immaterial.

So ultimately, I guess it depends on the choice/interpretation of the data compiler and the relevance/materiality to the data user. Looking at your question, I'd fall on the side of your lecturer since knowing that one labour hour produced something as fractional as six hundredths of one whole unit isn't of much use to management while knowing that one whole unit took sixteen labour hours to produce clearly is.

Sandy Hood is the regular costings lecturer on here so I suggest you send him a PM and ask for his opinion.

Regards,

Robert

System

Re:Labour Productivity

HILLYJOE

As blobbyh has said, you are both right. I suspect you knew that already.

So long as you keep the efficiency of the business at the heart of your investigation it doesn't matter if you are comparing the number of units you have produced in an hour, or the time it takes to make one unit both enable you to see if productivity is rising or falling.

Month___Units___Labour Hours___Our Answer__Hers

Jan______20________320_____________0.06_____16
Feb______25________370_____________0.07_____14.8
Mar______22________320_____________0.07_____14.6

In your example, output per hour is rising, starting at 0.0625 in Jan going to 0.0676 in Feb and to 0.06875 in March.
It can also be represented by 16 hours were needed to make one unit in Jan, that fell to 14.8 hrs in Feb and fell again to 14.545 hrs in March.

Now stop and think who you need to communicate this with.
Are the works manager and foremen at this factory going to find it easier to talk to their staff in terms of output as 0.0625 etc per hour (about a 1/16th of a unit) or will 16 finished products per hour make more sense?

We are generally not mathematicians talking to other mathematicians.
We have a communication aspect to our work that demands clarity and ease of understanding. The answer you produce is not the end of the job.

My vote is against your correct answer as it would be much easier to communicate your lecturer's equally correct answer.

sandy.hood@chichester.ac.uk