Refer to the data for problem 13-37. Assume the fabric costs $4 per metre in 2013 and $4.10 per metre in 2012.
In exercise
Guble Company manufactures wallets from fabric. In 2012, Guble made 2,500,000 wallets using 1,875,000 metres of fabric. In 2013, Guble plans to make 2,650,000 wallets and wants to make fabric use more efficient. At the same time, Guble wants to reduce capacity; capacity in 2012 was 3,000,000 wallets at a total cost of $9,000,000. Guble wants to reduce capacity to 2,800,000 wallets, at a total cost of $8,680,000 in 2013.
Suppose that in 2013 Guble makes 2,650,000 wallets, uses 1,669,500 metres of fabric, and reduces capacity to 2,800,000 units and costs to $8,680,000.
REQUIRED
1. Compute Guble Company’s total factor productivity (TFP) for 2013.
2. Compare TFP for 2013 with a benchmark TFP for 2012 inputs based on 2013 output.
3. What additional information does TFP provide that partial productivity measures do not?