Maths focus: productivity ratios by Dawn Weeden
An important way of measuring performance in an organisation is by considering productivity. This assesses how well an organisation is using its available resources. You will need to be able to calculate productivity ratios for Unit 7: Preparing Reports and Returns (NVQ) and in Unit 31: Accounting Work Skills(Diploma).
What maths do you need?
You need to be able to multiply and to divide.
What do you need to learn?
Productivity measures the level of output (sales) in relations to the level of input, (usually measured in hours). The two most common productivity measures are labour productivity and machine productivity, and result in a value of output per labour hour or per machine hour. These ratios can then be compared over time or with other similar organisations.
Productivity is calculated as the output for the period (in £) divided by the hours worked during that period.
An example
Grimsbee Ltd has two departments, one labour intensive (L Department) and the other machine intensive (M Department). It wishes to calculate the productivity of each department for the quarter (13 weeks) ended June 2008.
(a) L Department has four employees who work seven hours a day and five days a week. The output for the quarter ended June 2008 was £50,050.
(b) M Department has one machine that operates eight hours a day for six days a week. The output for M Department for the quarter ended June 2008 was £11,856.
Solution
(a) The first task is to calculate the number of hours worked during the period: 4 employees x 7 hours x 5 days x 13 weeks = 1,820 hours for the period Productivity is then calculated by dividing the output by the total hours worked: £50,050 / 1,820 hours = £27.50 per labour hour
(b) Again, the total machine hours for the quarter need to be calculated: 8 hours x 6 days x 13 weeks = 624 hours for the period Productivity is then calculated by dividing the output by the total machine hours: £11,856 / 624 hours = £19 per machine hour
Now you try
Using the following information for Grimsbee Ltd, calculate the productivity of each department for the quarter (13 weeks) ended March 2008.
(a) L Department has five employees who work seven hours a day and five days a week. The output for the quarter ended March 2008 was £59,150.
(b) M Department has one machine which operates ten hours a day for six days a week. The output for M Department for the quarter ended March 2008 was £15,600.
