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. Gallons input (thousands) Labor-hours (thousands) Gallons of output (thousands) Year 2 9,000 10,000 10,800 Year 1 8,000 7,600 8,800 From the accounting records, you also gather the following information for the two years. Cost of inputs (per gallon) Wage rate (per hour) Total manufacturing overhead Selling price of output (per gallon) पीपीपीपी Year 2 $ 85 22 $1,280,000 $ 360 Year 1 $ 90 $ 19 $1,160,000 $ 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.) Year 2 Year 1 Total factor productivity

Answer 1

Ans. A		Year 2	Year 1
	Total factor productivity	1.717	1.608
	*Working Notes:
	Step 1 : Calculations for Total value of output:
		Year 2	Year 1
	Gallons of output	10800	8800
	(*) Selling price of output	$360	$370
	Total value of output	$3,888,000	$3,256,000
	Step 2 : Calculation of Total value of materials used :
		Year 2	Year 1
	Gallons of input used	9000	8000
	(*) Cost of input	$85	$90
	Total value of materials used	$765,000	$720,000
	Step 3 : Calculation of Total value of labor hours used :
		Year 2	Year 1
	Labor hours	10000	7600
	(*) Wages rate per hour	$22	$19
	Total value of labor hours used	$220,000	$144,400
	Step 5 : Calculations of Total factor productivity:
		Year 2	Year 1
	Total value of materials used	$765,000	$720,000
	Total value of labor hours used	220000	144400
	Total manufacturing overhead	$1,280,000	$1,160,000
	Total value of input	$2,265,000	$2,024,400
	Total value of output   (a)	$3,888,000	$3,256,000
	Total value of input (b)	$2,265,000	$2,024,400
	Total factor productivity (a / b)	1.717	1.608