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CMA Intermediate · Operations Management and Strategic Management · Introduction to Operations Management

Kaveri Appliances makes 4,000 units a month with a total input cost of ₹10,00,000. It introduces a new process: output rises to 5,000 units while total input cost rises to ₹11,25,000. By what percentage does productivity (output per rupee of input) change?

Productivity rises by 11.11%. Earlier it was 4,000/10,00,000 = 0.004 units per rupee; now it is 5,000/11,25,000 = 0.004444. The increase is 0.000444/0.004 = 11.11%. The 25% figure ignores the higher input cost.

  1. AIncreases by 11.11%Correct
  2. BIncreases by 25%
  3. CIncreases by 12.5%
  4. DDecreases by 10%

Explanation

Old productivity = 4,000/10,00,000 = 0.004 units per rupee. New = 5,000/11,25,000 = 0.004444. Change = (0.004444-0.004)/0.004 = 11.11%. The 25% option counts output growth alone and ignores the cost rise; 12.5% counts the cost rise alone.

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