Standard productivity

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Standard productivity is the ratio of total revenue from sales and cost of used manufacturing resources. It allows to compare value of sales in time, with level of money involved in the company resources.

The computational formula

Productivity depends on used manufacturing factors in economic processes. The indicators determining the standard productivity inform what sales volume is generated by value of manufacturing resources, without providing information about the participation of the particular resource in the creation of the final result. They are\[P_l = { S_m \over {\sum l_i} } \]

\(P_{l_i} = { S_m \over l_i } \)

where:

  • P l - general standard productivity,
  • P li - partial standard productivity for i-th manufacturing factor
  • Sn - sales revenue,
  • L i - value of the i-th manufacturing factor

You need to take into account that the standard productivity factor includes error, because it inadequately charged only one factor that creates the final result. From the formula, it appears that the total sales revenue accrue to only one manufacturing factor which is incorrect reasoning. This problem is eliminated by using structural productivity indicator, which analyze effects of specific types of activities in the company. However, a prerequisite for its calculations is to find the share of each activity in generating sales revenue.

The purpose of the productivity calculations is to evaluate the productivity of manufacturing factors of each type of activity. Productivity can have also the diagnostic function and inform of existence of synergistic effect.

See also:

References