Unit Sginance: Labour Productivity and Unit Costs

Flashcards covering the link between labour productivity, unit costs, and profitability, including formulas and factors influencing productivity.

How does higher labour productivity affect unit costs?

Higher labour productivity leads to lower unit costs.

What is the impact of lower unit costs on a business's profitability?

Lower unit costs increase profitability.

What is the formula for calculating labour costs per unit?

Labour costs per unit = Labour costs / units of output.

How can businesses achieve higher labour productivity?

Through motivation, a good working environment, more machinery, or job rotation.

According to the provided table, which business had the lowest unit costs and was considered the 'most productive'?

Business D, with a unit cost of £3 and 25,000 units of output.

Why might unit costs not always rise, even if total costs increase?

Due to economies of scale, where fixed costs are spread across more units of output, causing unit costs to fall if total costs rise less quickly in percentage terms than output.

If labour productivity is 8 units and there are 6 employees, what is the total output?

48 units of output (8 units x 6 employees).