Productivity for Intermediate Outputs

As with final outputs, productivity for intermediate outputs should be optimized, but the task is simpler because fewer variables apply. The target quantity for an intermediate output is the minimum quantity required for the target quantities of all associated final outputs.

The input cost of an intermediate output is part of the life-cycle input cost of the final outputs, and this cost must be minimized.

The productivity for an intermediate output should therefore rise until the required quantity is reached and the input cost of producing this quantity is minimized.

For example, the output quantity for wheelbarrows depends on the output quantities for final outputs (and other intermediate outputs) that require soil, sand, and other materials to be moved manually. Productivity must be high enough to permit this many wheelbarrows to be manufactured given the available labor force.

If this is not possible, and if workers cannot be diverted from other tasks to wheelbarrow production, then the output quantities for the associated final outputs will have to be scaled back. Assuming that the required number of wheelbarrows can be produced, productivity should be increased so as to minimize input cost.

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