Question

Refer to the HR Reports in the Inquirer. Through past investments in recruiting and training Digby has obtained a productivity index of 109.6%. This means that Digby's labor costs would be increased by 9.6% if it did not have these productivity improvements. This is a competitive advantage that Digby can sustain or even widen further if its competitors have no HR initiatives. Now, refer to the Income Statement in Digby's Annual Report. How much did Digby's productivity improvements save it in direct labor costs (in thousands) last year?

Answer 1

$3,137

Step-by-step explanation:

The computation of Digby's productivity improvements save it in direct labor costs is shown below:-

Direct labor cost = Total direct labor cost × Percentage of Labor cost

= $32,680 × 9.6%

= $3,137

Index of productivity indicates the efficiency with which a given quantity of inputs brings out the output. It is normally determined by the ratio between output to input.

Here, labor production is 109.6%, which means that the actual cost would have been 9.6% higher.