of machines by 150%.

Option 3 is to raise the working hours per day by 25%, KWH used per machine by
10%, and units produced per day by 70%.

*Tasks-Which of the three options can provide the highest productivity increase in terms of a) labor
only, b) power only and c) both factors + material cost? How much is the increase?

Summary of proposed changes:

Item Current Option 1 Option 2 Option 3

No. of staff 50 -22% -20% x

Working hours/day 8 x x +25%

Payroll cost/hour (USD) 15 -20% x x

No. of machines 2 x +150% x

KWH used /machine 200 x x +10%

Power cost/KWH 1 +100% x x

Units produced/day 20 x x +70%

Material cost/unit 6 x -50% x

To help you compute the resultant productivity level by Option, do a similar table as above, plugging the
effects of each option.

You can use the table format to plug in the items needed for each task ie., labor productivity, power
productivity and labor/power/material cost combined productivity (multi factor productivity).

ANSWERS:
EFFECT:

Item Current Option 1 Option 2 Option 3

No. of staff 50 39 40 50
Working hours/day 8 8 8 10
Payroll cost/hour 15 12 15 15
(USD)
No. of machines 2 2 5 2
KWH used /machine 200 200 200 220
Power cost/KWH 1 2 1 1
Units produced/day 20 20 20 34
Material cost/unit 6 6 3 6
 A.) LABOR PRODUCTIVITY

FORMULA:

Labor-hours/day = (number of staff) * (working hours/day)

Units/labor-hour = (units produced/day) / (labor-hours/day)
Increase or decrease from current, units = (units/labor-hour of option) – (current units/labor-hour)
Increase or decrease from current, percent = (increase or decrease from current, units) / (current units/labor-hour)

SOLUTION:
Labor-hours/day = (number of staff) * (working hours/day)
 Current = 50*8 = 400
 Option 1 = 39*8 = 312
 Option 2 = 40*8 = 320
 Option 3 = 50*10 = 500

Units/labor-hour = (units produced/day) / (labor-hours/day)

 Current = 20/400 = 0.05
 Option 1 = 20/312 = 0.0641
 Option 2 = 20/320 = 0.0625
 Option 3 = 34/500 = 0.068

Increase or decrease from current, units = (units/labor-hour of option) – (current units/labor-hour)

 Option 1 = 0.0641-0.05 = 0.0141
 Option 2 = 0.0625-0.05 = 0.0125
 Option 3 = 0.068-0.05 = 0.018

Increase or decrease from current, percent = (increase or decrease from current, units) / (current units/labor-
hour)
 Option 1 = 0.0141/0.05 = 28.20%
 Option 2 = 0.0125/0.05 = 25.00%
 Option 3 = 0.018/0.05 = 36.00%

Item Current Option 1 Option 2 Option 3

Labor-hours/day 400 312 320 500
Units/labor-hour 0.05 0.0641 0.0625 0.068
Increase or decrease from current, units 0.0141 0.0125 0.018
Increase or decrease from current, percent 28.20% 25.00% 36.00%
Best Option No No Yes

As stated from the above illustration the best option for Labor Productivity is the Option 3 for the
reason that it has the highest productivity increase of 0.018 units/labor-hour or 36% from the current
units/labor-hour.
 B.) POWER PRODUCTIVITY

FORMULA:
KWH used/day= (number of machines) * (KWH used/machine)
Units/KWH= (units produced/day) / (KWH used/day)
Increase or decrease from current, units = (units/KWH of option) – (current units/KWH)
Increase or decrease from current, percent = (increase or decrease from current, units) / (current units/KWH)

SOLUTION:

KWH used/day= (number of machines) * (KWH used/machine)

 Current = 2*200 = 400
 Option 1 = 2*200 = 400
 Option 2 = 5*200 = 1,000
 Option 3 = 2*220 = 440

Units/KWH= (units produced/day) / (KWH used/day)

 Current = 20/400 = 0.05
 Option 1 = 20/400 = 0.05
 Option 2 = 20/1,000 = 0.02
 Option 3 = 34/440 = 0.0773

Increase or decrease from current, units = (units/KWH of option) – (current units/KWH)

 Option 1 = 0.05 – 0.05 = 0
 Option 2 = 0.02-0.05 = -0.03
 Option 3 = 0.0773-0.05 = 0.0273

Increase or decrease from current, percent = (increase or decrease from current, units) / (current units/KWH)
 Option 1 = 0/0.05 = 0.00%
 Option 2 = -0.03/0.05 = -60.00%
 Option 3 = 0.0273/0.05 = 54.60%

Item Current Option 1 Option 2 Option 3

KWH used/day 400 400 1000 440
Units/KWH 0.05 0.05 0.02 0.0773
Increase or decrease from current, units 0 -0.03 0.0273
Increase or decrease from current, percent 0.00% -60.00% 54.60%
Best Option No No Yes

As seen from the above table the best option for Power Productivity is Option 3 for the reason that it
has the highest productivity increase of 0.0273 units/KWH or 54.60% from the current units/KWH.

C.) MULTI FACTOR PRODUCTIVITY

FORMULA:
Labor cost/day = (labor-hours/day) * (payroll cost/hour)
Power cost/day = (KWH used/day) * (power cost/KWH)
Material cost/day = (units produced/day) * (material cost/unit)
Total cost/day = (labor cost/day) + (power cost/day) + (material cost/day)
Units = (units produced/day) / (total cost/day)
Increase or decrease from current, units = (units of option) – (current units)
Increase or decrease from current, percent = (increase or decrease from current, units) / (current units)

SOLUTION:

Labor cost/day = (labor-hours/day) * (payroll cost/hour)

 Current = 400*15 = 6,000
 Option 1 = 312*12 = 3,744
 Option 2 = 320*15 = 4,800
 Option 3 = 500*15 = 7,500

Power cost/day = (KWH used/day) * (power cost/KWH)

 Current = 400*1 = 400
 Option 1 = 400*2 = 800
 Option 2 = 1,000*1 = 1,000
 Option 3 = 440*1 = 440

Material cost/day = (units produced/day) * (material cost/unit)

 Current = 20*6 = 120
 Option 1 = 20*6 = 120
 Option 2 = 20*3 = 60
 Option 3 = 34*6 = 204

Total cost/day = (labor cost/day) + (power cost/day) + (material cost/day)

 Currrent = 6,000+400+120 = 6,520
 Option 1 = 3,744+800+120 = 4,664
 Option 2 = 4,800+1,000+60 = 5,860
 Option 3 = 7,500+440+204 = 8,144

Units = (units produced/day) / (total cost/day)

 Current = 20/6,520 = 0.00306
 Option 1 = 20/4,664 = 0.00428
 Option 2 = 20/5,860 = 0.00341
 Option 3 = 34/8,144 = 0.00417

Increase or decrease from current, units = (units of option) – (current units)

 Option 1 = 0.00428-0.00306 = 0.00122
 Option 2 = 0.00341-0.00306 = 0.00035
 Option 3 = 0.00417-0.00306 = 0.00111

Increase or decrease from current, percent = (increase or decrease from current, units) / (current units)
 Option 1 = 0.00122/0.00306 = 39.87%
 Option 2 = 0.00035/0.00306 = 11.44%
 Option 3 = 0.00417/0.00306 = 36.27%
Item Current Option 1 Option 2 Option 3
Labor cost/day 6,0 3,7 4,8 7,5
00 44 00 00
Power cost/day 4 8 1,0 4
00 00 00 40
Material cost/day 1 1 2
20 20 60 04
Total cost/day 6,5 4,6 5,8 8,1
20 64 60 44
Units 0.00306 0.00428 0.00341 0.00417
Increase or decrease from current, units 0.00122 0.00035 0.00111
Increase or decrease from current, percent 39.87% 11.44% 36.27%
Best Option Yes No No

As seen from the above table the best option for Multi Factor Productivity is Option 1 for the reason
that it has the highest productivity increase of 0.00122 units or 39.87% or 40% from the current units.
In the Option 1 the number of staff members is reduce by 22% and the payroll cost per hour is reduce by 20% but
raise the power cost per KWH by 100%.

If ever labor or power productivity alone is used, the best alternative option is Option 3 though as a
labor/power/material cost combined productivity the best option is Option 1.