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	1260000
Cost of materials	6300000
Total PQ cost	7560000

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

Cost of labor	1575000
Cost of materials	5250000
Total current cost	6825000

What is the net value of the productivity changes?

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.