ABC Corporation makes small parts from steel alloy sheets. Management has the fl

Question

ABC Corporation makes small parts from steel alloy sheets. Management has the flexibility to substitute direct materials for direct manufacturing labor. If workers cut the steel carefully, more parts can be manufactured from a metal sheet, but this requires additional direct manufacturing labor hours. Alternatively, ABC can use fewer labor hours if it is willing to tolerate more waste of direct materials. ABC decided to improve materials productivity this year and the following provides information for the current and prior year:

Required: Carry all computations to four digits after the decimal point.

2. Calculate ABC's total productivity in units per dollar in each of the two years.

Prior Year Current Year Output units 400,000 490,000 Direct manufacturing labor hours 10,000 13,500 Wages per hour $26 $24 Direct materials used 160 tons 180 tons Direct materials cost per ton $3,375 $3,250

Explanation / Answer

Prior Year Current Year Output units 400,000 490,000 Direct manufacturing labor hours 10,000 13,500 Wages per hour $26 $24 Direct materials used 160 tons 180 tons Direct materials cost per ton $3,375 $3,250 Labour hours per unit per hour                        0.025                        0.028 Labour Cost per Unit in $                        0.650                        0.661 Material consumed per Unit in ton                        0.000                        0.000 material cost per unit in $                        1.350                        1.240 Total cost per Unit in $                        2.000                        1.901

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