Prancing Products has provided the following information for last year:
$$\begin{array} { l r l }
\text { Gallons input } & 10,000 & @ \$ 15 / \text { gallon } \
\text { Labor hours } & 5,000 & @ \$ 20 / \text { hour } \
\text { Overhead costs } & \$ 125,000 & \
\text { Gallons finished } & 8,000 & @ \text { selling price of } \$ 55 / \mathrm { gallon }
\end{array}$$
The total factor productivity measure is:
A) 1.25.
B) 1.60.
C) 15.63.
D) 1.17.

Question

Prancing Products has provided the following information for last year:
$$\begin{array} { l r l } 
\text { Gallons input } & 10,000 & @ \$ 15 / \text { gallon } \
\text { Labor hours } & 5,000 & @ \$ 20 / \text { hour } \
\text { Overhead costs } & \$ 125,000 & \
\text { Gallons finished } & 8,000 & @ \text { selling price of } \$ 55 / \mathrm { gallon }
\end{array}$$
The total factor productivity measure is:
A) 1.25.
B) 1.60.
C) 15.63.
D) 1.17.

Quizplus · Accepted Answer

Total factor productivity is calculated as the ratio of total output to total input costs. The total output value is 8,000 gallons * $55 = $440,000. The total input cost is (10,000 gallons * $15) + (5,000 hours * $20) + $125,000 = $425,000. Therefore, the total factor productivity is $440,000 / $425,000 = 1.035, which is closest to option D (1.17).

Prancing Products Has Provided the Following Information for Last Year