Refer to the data for Exercise 13-37. Assume the fabric costs $4 per metre in 2016 and

Question:

Refer to the data for Exercise 13-37. Assume the fabric costs $4 per metre in 2016 and $4.10 per metre in 2015.

In Exercise 13-37

Guble Company manufactures wallets from fabric. In 2015, Guble made 2,500,000 wallets using 1,875,000 metres of fabric. In 2016, Guble plans to make 2,650,000 wallets and wants to make fabric use more efficient. At the same time, Guble wants to reduce capacity; capacity in 2015 was 3,000,000 wallets at a total cost of $9,000,000. Guble wants to reduce capacity to 2,800,000 wallets, at a total cost of $8,680,000 in 2016. Suppose that in 2016 Guble makes 2,650,000 wallets, uses 1,669,500 metres of fabric, and reduces capacity to 2,800,000 units and costs to $8,680,000.

Required

1. Compute Guble Company's total factor productivity (TFP) for 2016.

2. Compare TFP for 2016 with a benchmark TFP for 2015 inputs based on 2016 output.

3. What additional information does TFP provide that partial productivity measures do not?

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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