Cornerstone Exercise 15.4 (Algorithmic) Profit-Linked Productivity Measurement

In 2015, Choctaw Company implements a new process affecting labor and materials.

Choctaw Company provides the following information so that total productivity can be valued:

	2014	2015
Number of units produced	600,000	510,000
Labor hours used	200,000	255,000
Materials used (lbs.)	2,000,000	1,275,000
Unit selling price	24	26
Wages per labor hour	14	16
Cost per pound of material	3.40	3.50

Required:

1. Calculate the cost of inputs in 2015, assuming no productivity change from 2014 to 2015. If required, round your answers to the nearest dollar.

Cost of labor	$
Cost of materials
Total PQ cost	$

2. Calculate the actual cost of inputs for 2015. If required, round your answers to the nearest dollar.

Cost of labor	$
Cost of materials
Total current cost	$

What is the net value of the productivity changes? If required, round your answers to the nearest dollar. $

How much profit change is attributable to each input's productivity change? If an item is negative, use a minus (-) sign to indicate.

Labor productivity change	$
Materials productivity change	$

3. What if a manager wants to know how much of the total profit change from 2014 to 2015 is attributable to price recovery? Calculate the total profit change. $

Calculate the price-recovery component. $