Novelty Pumps Ltd (NPL) manufactured 20,000 pumps
during a year. The pumps sell for Mu 50 each, and the company
spent Mu 10 per pump in materials and it used 8000 person-hrs
of labor to make the pumps.
Compute NPL's (a) Output/labor ratio,
(b) Output value/ labor ratio, and
(c) value added/labor ratio
(a) Output/labor ratio
= 20,000 pumps/8000 person -hours of labor
= 2.5 pumps per person-hour
(b) Output value /labor ratio
= (20,000 pumps x Mu 50 per pump)/ 8000 person-hours
= Mu 125 per person-hour
(c) Value-added = (output value - material costs)
= Mu 1,000,000 -Mu 200,000 =Mu 800,000 Value- added/labor ratio
= Mu 800,000/8000 person -hours = Mu 100 per person -hours
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