Partial productivity measurement. (Chapter Appendix) Berkshire Corporation makes small steel parts. Berkshire management has some ability to substitute direct materials for direct manufacturing labour. If workers cut the steel carefully, Berkshire can manufacture more parts out of a metal sheet, but this will require more direct manufacturing labourhours. Alternatively, Berkshire can use fewer direct manufacturing labour-hours if it is willing to tolerate a larger quantity of direct materials waste. Berkshire operates in a very competitive market. Its strategy is to produce a quality product at a low cost. Berkshire pro¬

duces no defective products. It reports the following data for the last two years of operations:

2006 2007 Output units 375,000 525,000 Direct material used, in kilograms 450,000 610,000 Direct material cost per kilogram $1.44 $1.50 Direct manufacturing labour-hours used 7,500 9,500 Wages per hour $24 $30 Manufacturing capacity in output units 600,000 582,000 Manufacturing capacity-related fixed costs $1,245,600 $1,222,200 550 Fixed manufacturing costs per unit of capacity $2,076 $2.10 Required 1. Compute the partial productivity ratios for 2006 and 2007.
2. On the basis ofthe partial productivity ratios alone, can you conclude whether and by how much productivity improved overall in 2007 relative to 2006? Explain.
3. How might the management of Berkshire Corporation use the partial productivity analysis?