Question

In: Accounting

As the cost accounting manager at Cambria Chemicals (CC), you are responsible for compiling and reporting...

As the cost accounting manager at Cambria Chemicals (CC), you are responsible for compiling and reporting various performance measures to the senior managers. The company instituted many efficiency improvement programs recently, and the CFO has asked you to measure and report total factor productivity measures based on the three inputs (material, labor, and overhead). Data for the last two years follow:

Year 2 Year 1
Gallons input (thousands) 10,600 9,600
Labor-hours (thousands) 8,900 6,500
Gallons of output (thousands) 12,400 10,400

From the accounting records, you also gather the following information for the two years:

Year 2 Year 1
Cost of inputs (per gallon) $ 79 $ 79
Wage rate (per hour) $ 25 $ 16
Total manufacturing overhead $ 1,360,000 $ 1,210,000
Selling price of output (per gallon) $ 380 $ 385

Required:

a. Compute the total factor productivity measures for year 1 and year 2 based on the three inputs (material, labor, and overhead).

Year 2 Year 1
Total factor productivity

Solutions

Expert Solution

Computation of total factor Productivity
Year 2 Year 1
Total Output Value (a)
(Selling Price of OutputX Gallon Output)
                     4,712,000                    4,004,000
(12400X380) (10400X 385)
Material Value (b)
( Cost of InputX Gallo Input)
                        837,400                       758,400
(79X10600) (79X9600)
Labor Value (c)
( Wages Rate per Hour X Labor Hours)
                        222,500                       104,000
(8900X25) (6500X16)
Overhead Value (given) (d)                      1,360,000                    1,210,000
Total Value of Input Cost (e=b+c+d)                      2,419,900                    2,072,400
Total factor productivity (a/e)                              1.947                            1.932

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