Profit-Linked Productivity Measurement

In 20x2, Choctaw Company implements a new process affecting labor and materials.

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

	20x1	20x2
Number of units produced	540,000	450,000
Labor hours used	180,000	225,000
Materials used (lbs.)	2,700,000	1,500,000
Unit selling price	$21	$23
Wages per labor hour	$15	$17
Cost per pound of material	$3.70	$3.80

Required:

1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2. 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 20x2. 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 20x1 to 20x2 is attributable to price recovery? Calculate the total profit change. $_________

Calculate the price-recovery component. $_________