Problem
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:
Number of units produced 510,000 420,000 Labor hours used 170,000 210,000 Materials used (lbs.) 1,700,000 1,050,000 Unit selling price 22 24 Wages per labor hour 12 14 Cost per pound of material 3.50 3.60.
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.
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.