A U.S. manufacturing company operating a subsidiary in an LDC

(less-developed country) shows the following results:

U.S. LDC Sales (units) 100,000 20,000 Labor (hours) 20,000 15,000 Raw materials (currency) $20,000 (US) 20,000 (FC)

Capital equipment (hours) 60,000 5,000

a. Calculate partial labor and capital productivity figures for the parent and subsidiary. Do the results seem confusing?

b. Compute the multifactor productivity figures for labor and capital together. Do the results make more sense?

c. Calculate raw material productivity figures (units/$ where $1 = 10 units of the foreign currency). Explain why these figures might be greater in the subsidiary.

TW-1