Question

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 partial productivity for both labor and materials. Data for the last two years follow.

	Year 2	Year 1
Gallons input(Thousands)	9,000	8,000
Labor-hours (thousands)	10,000	7,600
Gallons of output (thousands)	10,800	8,800

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

	Year 2	Year 1
Cost of inputs(per gallon)	$85	$90
Wage rate (per hour)	$22	$19
Total Manufacturing overhead	$1,280,000	$1,160,000
Selling price of output (per gallon)	$360	$370

Required:

a. Compute the total factor productivity measures for year 1 and year 2 based on the three inputs (material, labor, and overhead). (round your answers to 3 decimal places)

Answer 1

Total factor productivity = Total value of output / Total value of input factor

Table showing Total Factor productivity

Particular	Year 2	Year 1
Gallons of Output (A)	10,800	8,800
Selling price of output (per gallon) (B)	360	370
Total value of output (C = A * B)	3888,000	3256,000
1. Material
Gallons of input used (D)	9000	8000
Cost of input (per Gallon) (E)	85	90
Total value of material used (F = D * E)	765,000	720,000
Total factor productivity based on material ( C / F)	5.082	4.522
2. Based on Labor
Total labor hours used (G)	10,000	7,600
Wages rate (Per hour) (H)	22	19
Total value of lobor hours used ( I = G * H)	220,000	144,400
Total factor productivity based on material ( C / I)	17.673	22.548
3. Based on overhead
Total manufacturing overhead (J)	1280,000	1160,000
Total factor productivity based on overhead ( C / J)	3.0375	2.807