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 27,000 $ 52 15, 200 $ 10 6,450 $ 25 1,500 $ 3 Prior Year 22,500 $ 52 14,200 $ 8 Units manufactured and sold Selling price of the product Direct materials used (pounds) Cost per pound of materials Direct labor hours Hourly wage rate Power (kwh ) Cost of power per kwh 7,200 $ 20 750 3 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

Anscoen O Coldits companyy campanative fncome hatement tor the yeonerded Current your Sales orevenule $55 x 2700 CO $ 1404000 dired materials $ 152000 15200 pounds x $ 10 G450 houa A $ 25 per yran died labor $ 161850 Powen 1500 hwh x $ 3 koh $ 4500 Prior yeon 22500 x $ 52 Sales unevenue $. 1170,000 Dieet matenials.= 14200 x $ 8 $ 113600 direct laboon F200 hows A $ 20 por houy $ 144000 Pouser 750 koh x $ 3 Koh e$ 2250

Pasnlicular Prior Current Sales revenuo $ 14 O4,000 $1,1 ¥0,000 Vantable cost of sales (& 15200 0) 113600) (4 161 250) G 14000) ($4500) 0250) $ 314150) ( a59850) $ 910150 Direct materials Diect labor Power Tobal variable costs Contribution margin $1086250 Change in openating income Inconease $ 146100 change fn operating fhcome = 1086a50 910150 $146100 ® Ceoigl pasdytiity otios of diand nterial , dinet labor and powen:- Direct materials units manubacun -ed & sold Cwoiert year opentioral produchivity oratio dsect materials in peords

Page No 3" 27000 15200 Į,7763 Prior 22500 year operational productivily orati o 14 200 1.5845 disec labor unith manubactined g sofd year operatiomal produchivily oratio Ceuuient dieef labor hrs '2부000 6450 4:1860 Rior gear operational produchinity oratio 22500 = 3.1250 7200 Pewer jear operational produchvity vabio Curent Powen in kwh 37000 18.0000 | 500 gran operational produchily vatio 22500 = 30.0000 350 Openahional preduchivily rahio Cuorent Prior year year Di ect materials Divect. dabo y Power 1. 7763 ļ,5845 4:1860 3.1250 18.0000 30.0000

Pagemo @ dieet roál eniola, dieet (abor NO O-knancias preductivik aio and pocwer Unili manubactuned gaold -Pnanancial produchiviky snatio - direct materials in dollass Direck materials 24000 fnancial year producivity watio Cworert $ 15 200 0 = 0.1776 Prion year finan cial produciviky ubie 22500 $ 113600 - O.1981 Direct labor 24000 financial productiviy onatio - Curent year $161250 O.1644 Rtor yean francial productivliy vratio D2500 $ 144000 O:1563

PageiNo O Poen wer financial productvity oratio Current 27000 yean = $ 4500 6.0000 Prion yean financial productivity ratio Da500 2250 10:0000 financial productivity vratio Garrent yeat year Direct måterials 0.1981 0.:1446 Direct labor 0. 156 3 O. 1674 Pocer 6.0000 10.0000