A U.S. company has two manufacturing plants, one in Michigan and one in Toluca, Mexico.  Both produce the same item, each for sale in their respective countries.  However, their productivity figures are quite different.  The analyst thinks this is because the Michigan plant uses more automoted equipment for processing while the other plant uses a higher percentage of labor.  Explain how that factor can cause productivity figures to be misleading.  Is there another way to compare the two plants that would be more meaningful?

Question

A U.S. company has two manufacturing plants, one in Michigan and one in Toluca, Mexico.  Both produce the same item, each for sale in their respective countries.  However, their productivity figures are quite different.  The analyst thinks this is because the Michigan plant uses more automoted equipment for processing while the other plant uses a higher percentage of labor.  Explain how that factor can cause productivity figures to be misleading.  Is there another way to compare the two plants that would be more meaningful?

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