At the end of 2011 Wilson Company implemented a new labor process and

At the end of 2011 wilson company implemented a new

This preview shows page 31 - 34 out of 124 pages.

QuestionAt the end of 2011, Wilson Company implemented a new labor process andredesigned its product with the expectation that input usage efficiency wouldincrease. Now, at the end of 2012, the president of the company wants anassessment of the changes on the company's productivity. The data neededfor the assessment are as follows:20112012Output20,00024,000Output prices$20$20Materials (lbs.)16,00016,800Materials unit price$6$8Labor (hrs.)10,0009,600Labor rate per hour$10$10Power (kwh)4,0006,000Price per kwh$2$3Required: Points: 10
Blackboard Learn [10/11/2011 11:58:54 PM] a.Compute the partial operational measures for each input for both 2011and 2012. What can be said about productivity improvement?b.Prepare an income statement for each year and calculate the totalchange in profits.c.Calculate the profit-linked productivity measure for 2012. What can besaid about the productivity program?d.Calculate the price-recovery component. What does this tell you? Answer a.Partial measures:20112012Material20,000/16,000 =1.2524,000/16,800 =1.43Labor20,000/10,000 =2.0024,000/9,600 =2.50Power20,000/4,000 =5.0024,000/6,000 =4.00Profile analysis indicates that productive efficiency has increased formaterials and labor and decreased for power. The outcome is mixedand no statement about overall productivity improvement can bemade without valuing the trade-off.b.Income statements:2011 2012 Sales$400,000$480,000Cost of inputs:Materials96,000134,400Labor100,00096,000Power8,00018,000Profit$196,000$231,600Total change in profits: $231,600 - $196,000 = $35,600c.Profit-linked measurement:InputPQ*PQ ´PAQAQ ´P(PQ ´P) - (AQ P)Materials19,200 $153,60016,800$134,400$19,200Labor12,000120,0009,60096,00024,000Power4,80014,4006,00018,000(3,600)$288,000 $248,400$39,600*Materials24,000/1.25 =19,200Labor24,000/2.00 =12,000Power24,000/5.00 = 4,800The value of the increases in efficiency for materials and labor more ´