13. The following data (all in billion S) are the sales and costs (excluding sel

Question

13. The following data (all in billion S) are the sales and costs (excluding selling and general and administrative costs) of McDonalds for company-operated restaurants (i.e., excluding franchise restaurants).13 (L03) a. Calculate the labour productivity (in S sales over S payroll & benefits costs) and its growth over time. Interpret your results. b. Calculate the multifactor productivity (in $ sales over $ all operating costs given) and its growth over time. Interpret your results. Sales Operating costs Food&paper; Payroll&benefits; Occupancy lease, etc) 2007 16.6 5.5 4.3 3.9 2008 16.6 5.9 4.3 3.8 2009 15.5 5.2 4.0 3.5

Explanation / Answer

Answer to question a :

Labour productivity in a year = Sales in a year / Payroll and benefits in that year

Therefore ,

Labour productivity during 2007 = 16.6/ 4.3 = 3.860

Labour productivity during 2008 = 16.6/4.3 = 3.860

Labour productivity during 2009 = 15.5/4 = 3.875

Percentage growth over time = ( 3.875 – 3.860)/ 3.86 x 100 = 0.3886 %

Labour productivity remains unchanged for first two years after which it increases in third year

Answer to question b :

Multifactor productivity = Sales/ ( Operating cost + Payroll + Occupancy )

Therefore ,Multifactor productivity for 2007 = 16.6 / ( 5.5 + 4.3 + 3.9) = 16.6/13.7 = 1.211

Multifactor productivity for 2008 = 16.6 / ( 5.9 + 4.3 + 3.8 ) = 16.6/14 = 1.185

Multifactor productivity for 2009 = 15.5 / ( 5.2 + 4 + 3.5) = 15.5 /12.7 = 1.220

Percentage Growth in multifactor productivity over 3 years = ( 1.22 – 1.211) / 1.211 x 100 = 0.743 %

Overall trend of Multifactor productivity is mixed because it is witnessing downward movement during first half and upward movement during 2nd half

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