Question

Profit-Linked Productivity Measurement

In 20x2, Choctaw Company implements a new process affecting labor and materials.

Choctaw Company provides the following information so that total productivity can be valued:

	20x1	20x2
Number of units produced	570,000	480,000
Labor hours used	190,000	240,000
Materials used (lbs.)	2,850,000	1,600,000
Unit selling price	$23	$25
Wages per labor hour	$12	$14
Cost per pound of material	$3.80	$3.90

Required:

1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2. If required, round your answers to the nearest dollar.

Cost of labor	$
Cost of materials
Total PQ cost	$

2. Calculate the actual cost of inputs for 20x2. If required, round your answers to the nearest dollar.

Cost of labor	$
Cost of materials
Total current cost	$

What is the net value of the productivity changes? If required, round your answers to the nearest dollar.
$

How much profit change is attributable to each input's productivity change? If an item is negative, use a minus (-) sign to indicate.

Labor productivity change	$
Materials productivity change	$

3. What if a manager wants to know how much of the total profit change from 20x1 to 20x2 is attributable to price recovery? Calculate the total profit change.
$

Calculate the price-recovery component.
$

Answer 1