Refer to the HR Reports in the Inquirer. Through past investments in recruiting and training Digby has obtained a productivity index of 109.6%. This means that Digby's labor costs would be increased by 9.6% if it did not have these productivity improvements. This is a competitive advantage that Digby can sustain or even widen further if its competitors have no HR initiatives. Now, refer to the Income Statement in Digby's Annual Report. How much did Digby's productivity improvements save it in direct labor costs (in thousands) last year?
$766 $29818 $3137 $3211
Annual Report Round: 0 Dec. 31, 2016 Digby C59559 2016 Income Statement 2016 Common Total (Product Name:) Daze Na Sales $25,485 $31,829 $34,848 $39,697 $0 so S131.859 100.0% Variable Costs $5,423S7,109 9,513 $10,636 $9,398 $12,538 $14,476 S17,028 $189 $15,131 $20,041 $24,313 $27,852 532.680 53,440 $1,217 $87,337 24.8% 40.5% Direct Material Inventory Carry Total Variable $0 SO SO SO S309 S325 0.5 66.2% Contribution 10,354 1,788 $10,535 $11,845 SO S44.521 33.8% Margin Period Costs $2,660 S3.167 $1,800 $1,900 $896 $1,050 S1,050 1,050 $1,050 S600 7.2% 2.9% 3.2% 2.3% 1.3% 16.8% SO $9.527 $3,768 $4,200 $3,000 $1.689 $22.184 SG&A: R&D $979 $0 SO SO SO $958 Sales Admin Total Period $1,000 S326 $408 S446 $5,994 S6,403 $4,832 $4,955 $0 $4,360 S5,385 5,703 $6,890 SO S22.337 16.9% Definitions: Sales: Unit sales times list price. Direct Labor: Labor costs incurred to produce the product that was sold. Inventory Carry Cost: the cost to carry unsold goods in inventory. Depreciation: Calculated on straight-line 15-year depreciation of plant value. R&D Costs: R&D EBIT department expenditures for each product. Admin: Administration overhead is estimated at 1.5% of sales. Promotions: The promotion budget for each product, Sales: The sales force budget for LongTerm Interest each product. Other: Charges not included in other categories such as Fees, Write Offs, and TQM. The fees include money paid to investment bankers and brokerage firms to issue new stocks or bonds plus consulting fees your instructor might assess. Write-offs include the loss you Net Profit might experience when you sell capacity or liquidate inventory as the result of eliminatinga production line. If the amount appears as a negative amount, then you actually made money on the liquidation of capacity or inventory. EBIT: Earnings Before Interest and Taxes. Short Term Interest: Interest expense based on last year's current debt, including short term debt, long term $21,859 3,249 $6,728 $4,158 S154 $7,568 16.6% 2.5% 5.1% 3.2% 0.1% 5.7% Short Term Interest Taxes Profit Sharing Variable Margins 2008 Digby 40.0% 30.0% 200% 10.0% 0.0% due, and emergency loans. Long Term Interest: Interest p outstanding bonds. Taxes: Income tax based upon a 35% tax rate. Profit Sharing: Profits shared with employees under the labor contract. Net Profit: EBIT minus interest, taxes, and profit sharing
