Relationship between Productivity and the Cost of Production

Topics: Costs, Variable cost, Cost Pages: 1 (347 words) Published: September 23, 2012
2.2 Analyze the relationship between productivity and the cost of production.

The definition of productivity is what is put out per the number of hours put in, or worked. For instance, if you make 50 cookies over 50 hours worked, your rate of productivity is 1 per hour.

The cost of production is comprised of several factors: fixed costs; variable costs; and the total cost. The fixed costs are defined as “costs that are spent and cannot be changed in the period of time under consideration” (Colander, 2010, p. 283). The variable costs are defined as ‘cost that changes as output changes” (Colander, 2010, p. 284). This is seen when there are hired workers, costing an hourly wage and the job takes more hours than foreseen, your variable costs can shift higher or lower. Total cost is the combination of the two above factors.

In looking at the relationship between productivity and the cost of production, the factor that influences this relationship the most is the variable cost, this could look like the change or rise in wage cost, material cost etc…I see this as relevant in my own professional experiences not from the cell phone industry but when my wife was in the high end food business. When her company would bring in products that involved variable costs, they would have to factor these considerations into the price. For example, oysters involved not only fluctuating costs in shipping and current cost (on the suppliers end this could involve the manpower in harvesting the oysters and packing the boxes) but on their end it would affect costs depending on if they needed to be shucked (opened) for the restaurants or not. If a chef wanted a box of shucked oysters, this would require the manpower to do this, thus increasing the cost through the increase of the productivity it would take to handle this order. Instead of just delivering a box of oysters, they would have an added labor cost.

References

Colander, D.C. (2010). Economics (8th...
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