Interperiod Measurement of Productivity, Profit-Linked Measurement

Helena Company needs to increase its profits and so has embarked on a program to increase its overall productivity. After one year of operation, Kent Olson, manager of the Columbus plant, reported the following results for the base period and its most recent year of operations:

	20x1	20x2
Output	184,320	216,000
Power (quantity used)	23,040	10,800
Materials (quantity used)	46,080	48,600

Suppose the following input prices are provided for each year:

	20x1	20x2
Unit price (power)	$ 2	$ 3
Unit price (materials)	16	15
Unit selling price	6	8

Required:

1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity?

2. Calculate the price-recovery component for 20x2.