In: Accounting
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).
|
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 |