Productivity

Question 1

What is productivity

Answer 1

A measure of the efficiency with which a business turns production inputs into outputs

Question 2

What is the most common measure of productivity

Answer 2

Labour productivity (output per worker)

Question 3

What is the calculation for labour productivity

Answer 3

Output for a time period / number of employees for that period

Question 4

What is the calculation for capital productivity

Answer 4

Output/capital employed

Question 5

How can productivity in retailing be measured

Answer 5

Through sales per square foot

Question 6

What are the advantages of higher productivity

Answer 6

1 increase economies of scale
2 increase competitiveness
3 spreading of fixed costs over higher output
4 lower unit costs
5 performance bonuses to workers - motivation

Question 7

How can productivity in manufacturing be improved

Answer 7

1 technology
2 lean production
3 training
4 workplace reorganization

Question 8

What does full capacity mean in manufacturing

Answer 8

That all factors of production are being used to their optimum level - producing optimum level of output

Question 9

When is it usual for businesses to be operating at full capacity

Answer 9

1 When the economy is booming
2 most of the time they will be operating below full capacity so they have spare capacity

Question 10

How is spare capacity measured

Answer 10

By looking at output as a % of total capacity
So if a factory can produce 2000 units per day and is only making 1700 then space capacity is 300 =15% so business is operating at 85% of full capacity 1700/2000 x100

Question 11

What are the problems of spare capacity

Answer 11

1 demotivation of staff - no overtime or bonuses
2 increased cost to business - may have to make redundancy payments
3 reduced profits - limits capital for investment
4 lack of return on capital investments

Question 12

How can a business resolve the problem of spare capacity

Answer 12

1 subcontracting production - get someone to produce goods for you - reduces capital investment
Can have its own problems - no control over quality, few subcontractors so prices can be high and reduces profit
2 rationalization - concentrating on core products and getting rid of non profitable products - risk of losing customers
3 increasing use of assets - retailers could sublet their floor space eg next have costa coffee in their stores

Question 13

What are the problems with working at full capacity

Answer 13

1 lack of flexibility
2 possible fall in quality
3 pressure on staff
4 more breakdown or machine failure.