Answer & Explanation:Bob Richards, the production
manager of Zychol Chemicals, in Houston, Texas, is preparing his quarterly
report, which is to include a productivity analysis for his department. One of
the inputs is production data prepared by Sharon Walford, his operations
analyst. The report, which she gave him this morning, showed the following:
2008
2009
Production (units)
4,500
6,000
Raw material used (barrels of
petroleum by-products)
700
900
Labor hours
22,000
28,000
Capital cost applied to the
department ($)
$375,000
$620,000
Bob knew that his labor cost per
hour had increased from an average of $13 per hour to an average of $14 per
hour, primarily due to a move by management to become more competitive with a
new company that had just opened a plant in the area. He also knew that his
average cost per barrel of raw material had increased from $320 to $360. He was
concerned about the accounting procedures that increased his capital cost from
$375,000 to $620,000, but earlier discussions with his boss suggested that
there was nothing that could be done about that allocation.
Bob wondered if his productivity had increased at all. He called Sharon into
the office and conveyed the above information to her and asked her to prepare
this part of the report.
Management’s expectation for
departments such as Mr. Richards’s is an annual productivity increase of 5%.
Required:
1. Prepare the productivity part of the report for Mr. Richards. Provide
calculations for:
A.
Change
year-over-year for each of the factors
B.
Single-factor
productivity
C.
Multi-factor
productivity
2. End the report by providing Mr. Richards your personal assessment of
your findings (Was the annual productivity increase
of 5% met? What does the data mean or allude to? What can management expect in
future years?)
