1. The current productivity of the company is €11 per labor hour.
2. The new productivity of the company under the bonus scheme is €11.67 per labor hour.
3. The earnings of the workers per unit before the bonus scheme is €7.00.
4. The earnings of the workers per unit under the bonus scheme is €7.67.
Productivity is the measurement of the output per unit of input per unit.
Productivity can be computed for these production resources: labor, capital, or others. In this case, productivity is the revenue realized per hour of labor.
Production units = 150
Estimated selling price = €150
Estimated total sales revenue based on total units = €22,500 (€150 x 150)
Defective units = 60 units (150 x 40%)
Lost revenue from defective units = €6,000 (60 x €150 - €50)
Total realizable revenue = €16,500 ($22,500 - $6,000)
Total labor hours used = 1,500 hours (300 x 5)
Current productivity = €11 per labor hour (€16,500/1,500)
New production units = 130 units
New revenue based on improvement = €18,500 (120 x €150 + 10 x €50)
Improvement in productivity in dollar terms = €2,000
Improvement given to workers = €1,000 (€2,000 x 50%)
Total realized revenue by the company = €17,500
New productivity = €11.67 per labor hour (€17,500/1,500)
Cost per unit = €70
Total cost or earnings before improved productivity = €10,500 (€70 x 150)
Additional bonus = €1,000
Total earnings after improved productivity = €11,500 (€10,500 + €1,000)
Earnings per unit before the bonus scheme = €7.00 (€10,500/1,500)
Earnings per unit under the bonus scheme = €7.67 (€11,500/1,500)
Thus, before the improvement in productivity, the earnings per unit for workers was €7.00, but this increased to €7.00 after the improvement in productivity.
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