Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 40

Partial Operational Productivity Frisen Communication Inc. manufactures a scrambling device for cellular telephones. The device’s main component is a delicate part, CSU10. CSU10 is easily damaged and requires careful handling. Once damaged, it must be discarded. The firm hires only skilled laborers to manufacture and install CSU10; however, some are still damaged. Robotic instruments process all other parts. Frisen’s operating data for 2009 and 2010 follow:

	2010	2009
Units manufactured	500,000	600,000
Number of CSU10used	800,000	825,000
Number of direct labor-hours spent	150,000	200,000
Cost of CSU10 per unit	$156	$135
Direct labor wage rate per hour	$56	$63

Required

1. Compute the partial operational productivity for 2009 and 2010.

---

2. On the basis of the partial operational productivity that you computed, what conclusions can you draw about the firm’s productivity in 2010 relative to 2009?

Step 1 of 3

Financial productivity: It can be defined as the benefit received from each 1 $ spend on the manufacturing process. It can be calculated by dividing the output received from the total costs incurred to receive the output.