Basics of Productivity Measurement Holbrook Company gathered the following data for the past two years: Base Year Current Year Output 990,000 1,050,000 Output prices $14 $14 Input quantities: Materials (lbs.) 198,000 1,050,000 Labor (hrs.) 99,000 525,000 Input prices: Materials $4 $5 Labor $8 $8 Required: 1. Prepare a productivity profile for each year. If required, round your answers to two decimal places. Holbrook Company Productivity Profile Base Year Current Year 2 X 1.8 x Materials productivity ratio Labor productivity ratio 16 X 18 X Feedback Check My Work 1. The productivity of a single input is typically measured by calculating the ratio of the output to the input as follows: Productivity ratio = Output/Input. 2. Prepare partial income statements for each year. Holbrook Company Partial Income Statements Base Year Current Year $ 13,860,000 $14,700,000 Sales Materials 792,000 5,250,000 Labor 792,000 4,200,000 Gross profit 12,276,000 5,250,000 Feedback Calculate the total change in income. If the change is negative, enter answer using a minus sign. -7,026,000 3. Calculate the change in profits attributable to productivity changes. If the change is negative, enter answer using a minus sign. If required, round your intermediate calculations to the nearest dollar. -7,770,000 x 4. Calculate the price-recovery component. If required, round your intermediate calculations to the nearest dollar. -210,000 x Feedback Check My Work 3. Calculate the cost of the inputs that would have been used in the absence of any productivity change and compare this cost with the cost of the inputs actually used. The difference in costs is the amount by which profits changed because of productivity changes. 4. The difference between the total profit change and the profit-linked productivity change is called the price-recovery component