Question

Cornerstone Exercise 15.4 (Algorithmic)
Profit-Linked Productivity Measurement

In 2015, Choctaw Company implements a new process affecting labor and materials.

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

	2014	2015
Number of units produced	600,000	510,000
Labor hours used	200,000	255,000
Materials used (lbs.)	2,000,000	1,275,000
Unit selling price	24	26
Wages per labor hour	14	16
Cost per pound of material	3.40	3.50

Required:

1. Calculate the cost of inputs in 2015, assuming no productivity change from 2014 to 2015. 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 2015. 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 2014 to 2015 is attributable to price recovery? Calculate the total profit change.
$

Calculate the price-recovery component.
$

Answer 1

Answert 2014 profile twity Yalios - 600,000 200,000 material productivity ratio = 600,000 2,000,000 = 0.30 O back period prechoetivitey ratio Thus, we have. Pallabo) = -519000 3 . - 170,000 hrs pa[materialy) = 510,000 0.3 = 1,700,000 cost di labor' = 170,000 X 16 = 2,180,000 cost di materials = 1700,000 X 3.50 = 5,950,000

@ Total pa cost = cost of labort cost of materials = 2,720 000+5,950,000 = 8,670,000 cost of labor $ 2,720,000 cost of materials | $5:9.50,000 : Total Pa cost $8,670,000 ☺ cost of labor = 255,000 x 16 4080000 cost de materiały = 1, 275,000X 3.50 =4462.500 Total current cost = 4080000 +4462500 = 8548,500 cost of labor Lcost of martoriali Liotal current cost $ 4080.000 $4462.500 168,540, 500

Profit-linked productivity measure i- input Pa PaxP AQ AQXP 90-AQ)XP. labor 1 70,000 2,7201000 055,000 4080000 $(1360000) materialy 1,700,000 51950 000 1975,000 4462500_18500 $3670000 $8540500 127500 net productivity Change = 127500 Labor productivity chang =$(13.600 materials preclutti virty change = $1497500 2014 10 $ 7500 2015 (2015 – 2004) Revenues 14400000 13260000 $(1140000) Cost a inputs 9600000 8542500 L Profit $4800000 $4747500 $82,500 =) 200,000X16+2,000,000X 3,40 = 9600000 ... ~600000 x 24 = 14400000

♡ Price tecom sy = toled profit chongo – profit linked I productivity change = $2,500 – 127,500 5-$45,000 recover the increase in pevenees would is not sulbuent to the increas in the cast off the inperts. . A though the incican blivity provided a sigmifi ecunt additional benefit.,