Question

Calculate the productivity in terms of revenue per dollar of input

Answer 1

The productivity of a company is an important measure of its success as a business. However, productivity is a broad term that can mean different things depending on whom you speak to or your particular perspective. For instance, you could say a company that generates $1 million in revenue is more productive than a company that generates $100,000. However, if the first company requires $500,000 a year to cover operating costs, and the second company needs only $10,000, your opinion might change. Therefore, it is useful to qualify productivity more precisely as a ratio of the amount of output, or revenue, for every unit of input, such as a dollar, invested.

1. Figure the total revenue generated by the company during the period of time you wish to calculate productivity for. Multiply the price of the services or goods the business sells by the number of units or services sold. Ensure that the period of time you choose is meaningful for the business and does not exclude seasonal spikes in sales. Check the company's latest balance sheet for data on sales.

2. Calculate the total operating costs used by the company to generate the revenue you calculated in Step 1. Include expenses such as overhead costs, raw materials, wages and utility bills.

3. Divide the total revenue of the company by the total dollar input in the business during the same period of time. This provides a productivity ratio of revenue per dollar input in the company. For instance, a company that generates $1 million for every $500,000 invested in the company has a productivity ratio of 2. On the other hand, a business that generates an output of $100,000 for every $10,000 invested has a revenue per dollar of input of 10.

Answer 2

Answer:

Divide the total revenue of the company by the total dollar input in the business during the same period of time. This provides a productivity ratio of revenue per dollar input in the company. For instance, a company that generates $1 million for every $500,000 invested in the company has a productivity ratio of 2.