Question:
BASICS OF PRODUCTIVITY MEASUREMENT
Holbrook Company gathered the following data for the past two years:
|
|
Base Year
|
Current Year
|
|
Output
|
900,000
|
1,080,000
|
|
Output prices
|
$15
|
$15
|
|
Input quantities:
|
|
|
|
Materials (lbs.)
|
1,200,000
|
720,000
|
|
Labor (hrs.)
|
300,000
|
540,000
|
|
Input prices:
|
|
|
|
Materials
|
$5
|
$6
|
|
Labor
|
$8
|
$8
|
Required:
1. Prepare a productivity profile for each year.
2. Prepare partial income statements for each year. Calculate the total change in income.
3. Calculate the change in profits attributable to productivity changes.
4. Calculate the price-recovery component. Explain its meaning.