Question

A productivity index of 110% means that a company's labor costs would have been 10% higher if it had not made production improvements. Now refer to the Income Statement in Digby's Annual Report. The direct labor costs for Digby were $32,486. These labor costs could have been $20,000 higher if investments in training that increased productivity had not been made. What was the productivity index for Digby that led to such savings?

A. 155.4%
B. 38.4%
C. 44.6%
D. 161.6%

Answer 1

D. 161.6%

Step-by-step explanation:

We first determinate the cost without the improvement AKA if the training were not done:

32,486 + 20,000 = 52,486 cost without the production improvements

Now we compare this against the actual cost incurred to know the productivity index : 52,486 / 32,486 = 1.6156498 = 161.6%

The cost could been 61.6% higher if it had not made production iimprovements.