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CMA Intermediate · Operations Management and Strategic Management · Productivity Management and Quality Management

Which of the following would be a genuine improvement in productivity?

Producing the same output with fewer physical inputs is a true productivity gain, since productivity is output per unit of input. Price changes or proportionate increases in both output and inputs do not alter the physical ratio.

  1. AOutput rises 10% because input prices of materials fell 10%, with the same physical quantities
  2. BOutput stays the same while the physical quantity of inputs used fallsCorrect
  3. CSales revenue rises because the selling price was increased
  4. DOutput rises 10% because labour hours were increased 10%

Explanation

Productivity is physical output per unit of input. Producing the same output with fewer physical inputs raises it. Price changes affect cost or revenue but not physical productivity, and proportionate rise in output and input leaves the ratio unchanged.

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