Productive Efficiency• Productivity – concerned with producing output efficiently – specifically addresses the relationship of output and the inputs used to produce the outputs • Total p
Trang 1COST MANAGEMENT
Accounting & Control
Hansen▪Mowen▪Guan
Chapter 15 Productivity Measure
and Control
Trang 2Study Objectives
1 Explain the meaning of productive efficiency, and
describe the difference between technical and allocative efficiency
2 Define partial productivity measurement, and list its
advantages and disadvantages
3 Explain what total productivity measurement is, and
name its advantages
4 Discuss the role of productivity measurement in
assessing activity improvement
Trang 3Productive Efficiency
• Productivity
– concerned with producing output efficiently
– specifically addresses the relationship of output and the inputs used to produce the outputs
• Total productive efficiency is the point at which two conditions are satisfied
– For any mix of inputs that will produce a given output,
no more of any one input is used than necessary to produce the output
– Given the mixes that satisfy the first condition, the
least costly mix is chosen
Trang 4Productive Efficiency
Technical Efficiency
the condition where no more of any one input is
used than necessary to produce a given output
Technical efficiency improvement occurs when less inputs are used to produce the same output or more output are produced using the same input.
Trang 5Productive Efficiency
Trang 6Productive Efficiency
Trang 7Productive Efficiency
Trang 8Productive Efficiency
Trang 9Of the two combinations that produce the same output, the least costly combination would be chosen.
Productive Efficiency
Trang 10Partial Productivity Measurement
Trang 11Partial Productivity Measurement
Partial Productivity Measure
– Measuring productivity for one input at a time.
Productivity ratio = Output ÷ Input
Operational Productivity Measure
– Partial measure where both input and output are expressed in physical terms.
Financial Productivity Measure
– Partial measure where both input and output are expressed in dollars.
Trang 122009 2010
Number of frames produced 240,000
250,000Labor hours used 60,000
50,000Materials used (lbs.) 1,200,000
1,150,000
Total Productivity Measurement
240,000 ÷ 1,200,000
250,000 ÷ 1,150,000 250,000 ÷ 50,000 240,000 ÷ 60,000
Trang 132009 2010
Number of frames produced 240,000
250,000Labor hours used 60,000
50,000Materials used (lbs.) 1,200,000
1,300,000
Total Productivity Measurement
240,000 ÷ 1,200,000
250,000 ÷ 50,000 240,000 ÷ 60,000
Trang 14Total Productivity Measurement
Profit-Linkage Rule
– For the current period, calculate the cost of
the inputs that would have been used in the
absence of any productivity change
– Compare this cost with the cost of the inputs actually used.
– The difference in costs is the amount by which profits changed because of productivity
changes
Trang 15Total Productivity Measurement
PQ = the inputs that would have been used
Current-period output
PQ =
Base-period productivity ratio
Trang 16Number of frames produced 240,000 250,000Labor hours used 60,000 50,000Materials used (lbs.) 1,200,000 1,300,000Unit selling price (frames) $30 $30Wages per labor hour $15 $15Cost per pound of material $3 $3.50
2009 2010
Total Productivity Measurement
Trang 17Total current cost $5,300,000
The actual cost of inputs:
Total Productivity Measurement
Trang 18Profit-linked effect = Total PQ cost – Total current cost
= $5,312,500 – $5,300,000
= $12,500 increase in profits
The net effect of the process change was
favorable Profits increased $12,500 because of productivity changes.
Total Productivity Measurement
Trang 19Total Productivity Measurement
Materials: 250,000 ÷ 0.200
Trang 20Measuring Changes in Activity
and Process Efficiency
Trang 21Number of purchase orders 200,000
240,000Material used (lbs.) 50,000
50,000Labor used (number of workers) 40
30Cost per pound of material $1
$0.80
2009 2010
Measuring Changes in Activity
and Process Efficiency
Trang 22Measuring Changes in Activity
and Process Efficiency
Trang 23Measuring Changes in Activity
and Process Efficiency
Trang 24Measuring Changes in Activity
and Process Efficiency
* Activity rates are calculated as total costs of materials and labor divided by the activity output.
continued
Trang 25Measuring Changes in Activity
and Process Efficiency
continued from previous slide
* Activity rates are calculated as total costs of materials and labor divided by the activity output.
Trang 26Measuring Changes in Activity
and Process Efficiency
Trang 27Measuring Changes in Activity
and Process Efficiency
Trang 28Measuring Changes in Activity
and Process Efficiency
Trang 29Measuring Changes in Activity
and Process Efficiency
Trang 30Measuring Changes in Activity
and Process Efficiency
Trang 31COST MANAGEMENT
Accounting & Control
Hansen▪Mowen▪Guan
End Chapter 15