Smarmy Sales Inc SSI sells herbal remedies through its Web s

Smarmy Sales, Inc. (SSI), sells herbal remedies through its Web site and through phone reps. Over the past six years, SSI has started to depend more and more n its Web site to generate sales. The figures below show total sales, phone rep costs, and Web site costs for the past six years: Calculate the productivity for the phone reps for each of the past six years. Interpret the results. Calculate the productivity for the Web site for each of the past six years. Interpret the results. Compare your results in parts a and b. What are the limitations of these single-factor productivity measures? Now calculate a multifactor productivity score for each year, where the \"input\" is the total amount spent on both the phone reps and the Web site. Interpret the results. What can you conclude?

Solution

Productivity = Output / Input

a)Productivity for the phone reps for each of the past 6 years.

Year 2008

Output = $ 4,790,000

Input = $ 200,000

Productivity = 4,790,000/200,000 = 23.95

Year 2009

Output = $ 5,750,000

Input = $ 210,000

Productivity = 5,750,000/210,000 = 27.38

Year 2010

Output = $ 6,900,000

Input = $ 221,000

Productivity = 6,900,000 / 221,000 = 31.22

Year 2011

Output = $ 8,280,000

Input = $ 230,000

Productivity =8,280,000/230,000 = 36

Year 2012

Output = $ 9,930,000

Input = $ 245,000

Productivity = 9,930,000/245,000 = 40.53

Year 2013

Output = $ 11,920,000

Input = $ 255,000

Productivity = 11,920,000/255,000 = 46.74

b) Productivity for the web site costs for each of the past 6 years.

Year 2008

Output = $ 4,790,000

Input = $50,000

Productivity = 4,790,000/50,000 = 95.8

Year 2009

Output = $ 5,750,000

Input = $ 65,000

Productivity = 5,750,000/65,000 = 88.46

Year 2010

Output = $ 6,900,000

Input = $ 85,000

Productivity = 6,900,000/85,000 = 81.17

Year 2011

Output = $ 8,280,000

Input = $ 110,000

Productivity = 8,280,000/110,000 = 75.27

Year 2012

Output = $ 9,930,000

Input = $ 145,000

Productivity = 9,930,000/145,000 = 68.48

Year 2013

Output = $ 11,920,000

Input = $ 190,000

Productivity = 11,920,000/190,000 = 62.73

c) Comparison of a) and b)

In singlr factor productivity, only one input is considered, so it is not a correct measure for productivity.

d) Multifactor Productivity for the for each of the past 6 years.

Year 2008

Output = $ 4,790,000

Input1 = $ 200,000

Input2 = $50,000

Productivity = 4,790,000/250,000 = 19.16

Year 2009

Output = $ 5,750,000

Input 1= $ 210,000

Input2 = $65,000

Productivity = 5,750,000/275,000 = 20.90

Year 2010

Output = $ 6,900,000

Input1 = $ 221,000

Input2 = $85,000

Productivity = 6,900,000 / 306,000 = 22.55

Year 2011

Output = $ 8,280,000

Input1 = $ 230,000

Input2 = $110,000

Productivity =8,280,000/340,000 = 24.35

Year 2012

Output = $ 9,930,000

Input1 = $ 245,000

Input2 = $50,000

Productivity = 9,930,000/295,000 = 33.66

Year 2013

Output = $ 11,920,000

Input 1= $ 255,000

Input2 = $50,000

Productivity = 11,920,000/305,000 = 39.08