Carlson Automotive Company manufactures fuel-injection systems. It manufactured and sold 60,000 units in 2018 and 64,000...

Carlson Automotive Company manufactures fuel-injection systems. It manufactured and sold 60,000 units
in 2018 and 64,000 units in 2019 at $25 per unit. In 2018, the firm used 75,000 pounds of alloy TPX–45 at
$7.20 per pound and used 10,000 direct labor hours at an hourly wage rate of $30. In 2019, the firm used
89,600 pounds of alloy TPX–45 at $6.80 per pound and used 10,847 direct labor hours at an hourly wage
rate of $32. The total amount of all other expenses remains the same at $450,000 each year. Jerry Olson,
CEO, was disappointed that although the total sales increased in 2019, operating income declined from
$210,000 in 2018 to $193,616 in 2019.

1. Detailed partition of partial financial productivity.
2. Total productivity for 2018 and 2019 as measured in both units and sales dollars.

Expert Solution


Particulars	2018	2019
Unit Base	Rate per unit	Total	Unit Base	Rate per unit	Total

Sale	60000	25	15,00,000.00	64000	25	16,00,000.00

Variable Costs
Direct Material	75000	7.2	5,40,000.00	89600	6.8	6,09,280.00
Direct Labour	10000	30	3,00,000.00	10847	32	3,47,104.00

			6,60,000.00			6,43,616.00
Fixed Costs			4,50,000.00			4,50,000.00
Operting Income			2,10,000.00			1,93,616.00

There has been a reduction in oeprating income from 2018 to 2019. This is due to the following reasons:
1) Direct Material per unit	2018	2019
		75000/60000	89600/64000
		1.25	1.4
Although there has been a redcution in Direct material price per unit but clearly there has been an increase in number of hours consumed per unit

2) Direct Labour per unit		2018	2019
		10000/60000	10847/64000
		0.167	0.169

There has been a small increase in number of hours per unit but rate has been increased by $2 per labour hour which has lead to reduction in operating income for the year 2019

ekkarill92 answered 1 year ago

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