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	108,000	112,500
Materials used (lbs.)	2,160,000	1,500,000
Unit selling price	$20	$22
Wages per labor hour	$12	$14
Cost per pound of material	$3.40	$3.50

Required:

1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2.

Cost of labor	$fill in the blank 1
Cost of materials	fill in the blank 2
Total PQ cost	$fill in the blank 3

2. Calculate the actual cost of inputs for 20x2.

Cost of labor	$fill in the blank 4
Cost of materials	fill in the blank 5
Total current cost	$fill in the blank 6

What is the net value of the productivity changes? $fill in the blank 7

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	$fill in the blank 8
Materials productivity change	$fill in the blank 9

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. $fill in the blank 10

Calculate the price-recovery component. $fill in the blank 11