Formula
Productivity rate is calculated as the total output of workers divided by hours worked.productivity = output / hours workedOutput is typically a dollar amount. This is usually net output that represents the value added by the hours worked. Alternatively, output can be measured in production units or any other measure of output that is meaningful to your business.Example #1
Workers on a production line produce 110,000 chocolate bars with a wholesale value of $170,000 on a shift. The costs of non-labor inputs such as ingredients, machines and electricity are $90,000. Therefore, the workers added $80,000 of value ($170,000 - $90,000) on the shift. The shift represents 64 hours of work.productivity = $80,000 / 64 = $1,250 / hourAlternatively, productivity could be calculated in units. This is useful when value added dollar amounts are difficult to estimate.productivity = 110,000 / 64 = 1718.8 units / hourExample #2
A freelance designer completes 4 projects for clients with a total value of $9,900 in a month. He has $2000 in expenses resulting in a net profit of $7,900. He works a total of 210 hours in the month including all administrative work and customer relationship management.productivity = $7900 / 210 = $37.62 / hour| Overview: Productivity Rate | ||
Type | ||
Definition (1) | The net output produced in an hour of work. | |
Definition (2) | The value added in an hour of work. | |
Related Concepts | ||
