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Productivity Analysis Case A plant manager has given you the following performance information for the last four weeks of the year. Using the template provided, develop a spreadsheet that calculates the labor, material, overhead and total productivity figures (in terms of $’s/$’s) for each week and decide whether or not this individual should get a raise based on productivity improvement. Also note the trends and the source of the problem or improvement, which ever is the case. Assume 40-hour weeks and an hourly wage of $14. Overhead is 1.65 times the weekly labor cost. Material cost is $6.50 per pound. The standard sales price is $140 per unit. Units of Number of Pounds of Output Workers Material Week 1 300 6 45 Week 2 338 7 46 Week 3 322 7 47 Week 4 354 8 48 Now let’s assume we are making the decision about next week’s pricing and we assume the operating facts are going to be the same as last week’s (week 4) data. This time, we want to charge a price that does not result in an overall change in total productivity from week 1’s level. At what sales price (roughly) would we have to sell our units for next week if we wanted that week’s productivity to be the same as week 1’s? If you built your spreadsheet well, this is a simple matter of plugging in new sales prices for week 4 and watching what happens to the total productivity number. Write up a memo describing your observations and recommendations and attach your spreadsheet to it. Submit it when due. (Adapted from problems/cases appearing in McGraw-Hill Higher Ed. texts.) Productivity Case Feedback All: I have received and graded your first assignments. Most all of you did the math correctly and noted what new price would make productivity in the fifth week equal to that of the first. Those who didn’t do the math correctly made the mistake of dividing profit, instead of total revenue, by the various expense types. Others made the simple mistake of not including all the costs to get to total costs. The correct answers for week four are: Total Operating Profit – $37,376
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Labor Productivity – 11.06 Material Productivity – 158.85 Overhead Productivity – 6.70 Total Productivity – 4.07 The correct new price to make week 5 total productivity the same as week 4 was $157 or so (assuming as the case indicates that all operating facts were the same). Note you do not put $’s before these ratios or %’s after them. These are $/$ figures so the $’s cancel out. The correct interpretation of the total productivity ratio would be “we earn $4.07 in revenue for ever $1.00 we spend in production.” Many of you failed to write an appropriate memo. Note the following for future assignments. 1. From the syllabus: "Type your responses in well-written memo form to be turned in.
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This note was uploaded on 11/13/2010 for the course BUS BUS 335 taught by Professor Griffin during the Fall '07 term at Peru State.

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