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 | 510,000 | 420,000 |
Labor hours used | 102,000 | 105,000 |
Materials used (lbs.) | 1,700,000 | 1,050,000 |
Unit selling price | 22 | 24 |
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.
$