Comparative Summary of The Models
PPPV models measure profitability as a function of productivity, volume and income distribution (unit prices). Such models are
- Japanese Kurosawa (1975)
- French Courbois & Temple (1975)
- Finnish Saari (1976, 2000, 2004, 2006a, 2006b)
- American Gollop (1979)
The table presents the characteristics of the PPPV models. All four models use the same variables by which a change in profitability is written into formulas to be used for measurement. These variables are income distribution (prices), productivity and volume. A conclusion is that the basic logic of measurement is the same in all models. The method of implementing the measurements varies to a degree, depending on the fact that the models do not produce similar results from the same calculating material.
Even if the production function variables of profitability and volume were in the model, in practice the calculation can also be carried out in compliance with the cost function. This is the case in models C & T as well as Gollop. Calculating methods differ in the use of either output volume or input volume for measuring the volume of activity. The former solution complies with the cost function and the latter with the production function. It is obvious that the calculation produces different results from the same material. A recommendation is to apply calculation in accordance with the production function. According to the definition of the production function used in the productivity models Saari and Kurosawa, productivity means the quantity and quality of output per one unit of input.
Models differ from one another significantly in their calculation techniques. Differences in calculation technique do not cause differences in calculation results but it is rather a question of differences in clarity and intelligibility between the models. From the comparison it is evident that the models of Courbois & Temple and Kurosawa are purely based on calculation formulas. The calculation is based on the aggregates in the loss and profit account. Consequently, it does not suit to analysis. The productivity model Saari is purely based on variance accounting known from the standard cost accounting. The variance accounting is applied to elementary variables, that is, to quantities and prices of different products and inputs. Variance accounting gives the user most possibilities for analysis. The model of Gollop is a mixed model by its calculation technique. Every variable is calculated using a different calculation technique. (Saari 2006b)
The productivity model Saari is the only model with alterable characteristics. Hence, it is an adjustable model. A comparison between other models has been feasible by exploiting this particular characteristic of this model.
Read more about this topic: Productivity Model
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