Case study:

the data concerning output input and profits for

this case are obtained from the monthly profit
loss statement of a company that manufactures
kitchen sinks, hospital equipment and the like.
The 12 data points for each variable under
consideration correspond to the monthly figures
in the fiscal year 1980and they have all been
deflated by the appropiate indices for each
period to reduce to constant dollars of base
period.

Based on the company historical data

for output and input in given table and
the statistical analysis through various
regression equation, the input function
for the firm estimated from the
following equation:
I=94408+ 0.00000*O^2

Output and total input values in base

period dollars
Output

Total
input

Output

Total
input

2701084.
43

282542.9
6

17524.38

168905.5
1

207737.2
5

188503.8
6

254705.4
2

271833.5
4

257935.4
5

235363.8
0

245696.1
5

211447.3
9

208359.1
0

191433.8
5

195010.1
9

167311

209396.3
5

162725.7
0

212978.5
3

216161.1
2

225413.5
4

219470.9
9

124229.6
3

134893.5
3

Regression analysis result for total

input as a funtion for output
Regression

R^2

Standard
error

TI= a+bO

39.35

.89295

18659

TI= a+bO^2

49.95

.91280

16928

TI= a+bO +
cO^2

24.16

.91814

17313

TI= ao^b

18.78

.8077

24434

Therfore

the total productivity of the

firm becomes
TPO=
Maximum level of output is given by
the company as $300000 according to
the capacity constraints.

For
the profit function the historical
vales are used to evaluate the
regression equation. After the
statistical analysis the profit function P
is expressed as
P(O)=

Output and profit values in base period

dollars
Output

Total
input

Output

Total
input

2701084.
43

-11484.54 17524.38

7018.88

207737.2
5

19233.98

254705.4
2

32871.84

257935.4
5

22571.65

245696.1
5

34248.76

208359.1
0

16925.24

195010.1
9

27698.84

209396.3
5

46670.68

212978.5
3

-3182.59

225413.5
4

5942.55

124229.6
3

-10663.90

Regression analysis result for profit as

a function of output
Regression

R^2

Standard
error

P= a+bO

.80

.27349

18659

P= a+bO +
cO^2

1.78

.53204

17314

P= a+b/O

1.65

.37616

17973

P= a + b/O +
cO^2

1.67

.51970

17469

P=aO^b

.94

.29271

4.525

 Productivity and profits reaches their

maximum at approximately the level of
$220000 of output . This indicates that
maximum profits are obtained at or near the
maximum level of total productivity.
This result show that profit are closely related
to the productivity of a company and profit
gains significant even with relatively small
increase in total productivity. The company can
therefore plan its total productivity and profit
simultaneously.