Summary Activity 5.5.6 Answers

Activity 5.5.6 – WESTLIFE JEANS LTD
1. For each year calculate the labor productivity and capital productivity for the
Westlife factory.
2012
Labor Productivity = total output/total workers
Labor Productivity = 50,000/20
Labor Productivity = 2,500

Capital Productivity = output/capital employed
Capital Productivity = 50,000/10
Capital Productivity = 5,000


2013
Labor Productivity = total output/total workers
Labor Productivity = 55,000/24
Labor Productivity = 2,292

Capital Productivity = output/capital employed
Capital Productivity = 55,000/12
Capital Productivity = 4,583

2014
Labor Productivity = total output/total workers
Labor Productivity = 60,000/30
Labor Productivity = 2,000

Capital Productivity = output/capital employed
Capital Productivity = 60,000/150
Capital Productivity = 4,000

2. Describe the trends in labor productivity and capital productivity over the three
years.
Both the labor productivity and capital productivity is continuously decreasing in a
linear manner over the three years. This means that Westlife Jeans’ productivity in
terms of its capital and labor are becoming less effective.

3. Explain two possible reasons for the change in labor productivity over the three
years.
- Employees are less motivated to the extent where they do not perform their
best, resulting in a decrease in labor productivity.
- The equipment or machineries needed during the manufacturing process may
not be as effective or efficient, resulting in a decrease in labor productivity.

4. Explain two consequences for the change in capital productivity over the three
years.