Decision Making

Pix Paper Inc. produces photographic paper for printing digital images. One of the processes for this operation is a coating (solvent spreading) operation, where chemicals are coated onto paper stock. There has been some concern about the cost performance of this operation. As a result, you have begun an investigation. You first discover that all materials and conversion prices have been stable for the last six months. Thus, increases in prices for inputs are not an explanation for increasing costs. However, you have discovered three possible problems from some of the operating personnel whose quotes follow:

Operator 1: "I've been keeping an eye on my operating room instruments. I feel as though our energy consumption is becoming less efficient."

Operator 2: "Every time the coating machine goes down, we produce waste on shutdown and subsequent startup. It seems as though during the last half year, we have had more unscheduled machine shutdowns than in the past. Thus, I think our yields must be dropping."

Operator 3: "My sense is that our coating costs are going up. It seems as though we are spreading a thicker coating than we should. Perhaps the coating machine needs to be recalibrated.

The Coating Department had no beginning or ending inventories for any month during the study period. The following data from the cost of production report are made available:

	January	February	March	April	May	June
Paper stock	$67,200	$63,840	$60,480	$64,512	$57,120	$53,760
Coating	$11,520	$11,856	$12,960	$15,667	$16,320	$18,432
Conversion cost (incl. energy)	$38,400	$36,480	$34,560	$36,864	$32,640	$30,720
Pounds input to the process	100,000	95,000	90,000	96,000	85,000	80,000
Pounds transferred out	96,000	91,200	86,400	92,160	81,600	76,800

a. Prepare a table showing the paper cost per output pound, coating cost per output pound, conversion cost per output pound, and yield (pounds transferred out/pounds input) for each month. Round your per unit answers to the nearest cent. If required, round the yield to the nearest whole number.

Pix Paper Inc.
Schedule of Costs for Six months
	January	February	March	April	May	June
Paper stock ($ pounds output)	$	$	$	$	$	$
Coating ($ pounds output)	$	$	$	$	$	$
Conversion cost ($ pounds output)	$	$	$	$	$	$
Yield (pounds transferred out pounds input)	%	%	%	%	%	%