Question

The chief at the ultrasound division of the radiology department in a community hospital

would like to measure the multi-factor productivity for a " complete abdomen "procedure.
The last three years of data were accumulated, as shown in Table EX 9.1.

TABLE EX 9.1
Measurement Year 1 Year 2 Year 3
Price ( $ ) 880 883 886
Volume 5,583 6,312 6,129
Labor ( $ ) 75,000 77,000 80,000
Materials ( $ ) 2,750 2,900 3,100
Overhead ( $ ) 6,500 6,700 7,000

What are the multi-factor productivity ratios for these years?

Answer 1

The multi-factor productivity ratios for the three years are approximately 58.28, 64.53, and 60.11.

Step-by-step explanation:

To calculate the multi-factor productivity ratio, we divide the output value by the sum of labor, materials, and overhead costs. In this case, the output value is equal to price multiplied by volume. Let's calculate the multi-factor productivity ratios for each year:

Year 1:

1. Output value: $880 * 5,583 = $4,915,040
2. Sum of labor, materials, and overhead costs: $75,000 + $2,750 + $6,500 = $84,250
3. Multi-factor productivity ratio: $4,915,040 / $84,250 ≈ 58.28

Year 2:

1. Output value: $883 * 6,312 = $5,581,296
2. Sum of labor, materials, and overhead costs: $77,000 + $2,900 + $6,700 = $86,600
3. Multi-factor productivity ratio: $5,581,296 / $86,600 ≈ 64.53

Year 3:

1. Output value: $886 * 6,129 = $5,425,214
2. Sum of labor, materials, and overhead costs: $80,000 + $3,100 + $7,000 = $90,100
3. Multi-factor productivity ratio: $5,425,214 / $90,100 ≈ 60.11