Question

In the fourth quarter of last year, Colditz Company embarked on a major effort to improve productivity. It redesigned products, reengineered manufacturing processes, and offered productivity improvement courses. The effort was completed in the last quarter of the current year. The controller’s office has gathered the following year-end data to assess the results of this effort:

	Current Year				Prior Year
Units manufactured and sold		24,000				18,000
Selling price of the product	$	59			$	59
Direct materials used (pounds)		15,900				12,000
Cost per pound of materials	$	20			$	16
Direct labor hours		7,150				7,900
Hourly wage rate	$	35			$	30
Power (kwh)		2,000				750
Cost of power per kwh	$	2			$	2

Required

1. Prepare a summary contribution income statement for each of the 2 years, and calculate the change in operating income.

2. Compute the partial operational productivity ratios for each production factor in each year.

3. Compute the partial financial productivity ratios for each production factor in each year.

Answer 1