In 2015, Choctaw Company implements a new process affecting labor and materials.
ID: 2570403 • Letter: I
Question
In 2015, Choctaw Company implements a new process affecting labor and materials.
Choctaw Company provides the following information so that total productivity can be valued:
Required:
1. Calculate the cost of inputs in 2015, assuming no productivity change from 2014 to 2015. If required, round your answers to the nearest dollar.
2. Calculate the actual cost of inputs for 2015. If required, round your answers to the nearest dollar.
What is the net value of the productivity changes? If required, round your answers to the nearest dollar.
$
How much profit change is attributable to each input's productivity change? If an item is negative, use a minus (-) sign to indicate.
3. What if a manager wants to know how much of the total profit change from 2014 to 2015 is attributable to price recovery? Calculate the total profit change.
$
Calculate the price-recovery component.
$
Explanation / Answer
1. Calculate the cost of inputs in 2015, assuming no productivity change from 2014 to 2015. If required, round your answers to the nearest dollar
Cost of Labor = (190,000 / 570,000) x 480,000 x $18
.......................= $2,880,000
Cost of Materials = (2,850,000 / 570,000) x 480,000 x $3.6
............................= $8,640,000
Total PQ Cost = $2,880,000 + $8,400,000
.......................= $11,280,000
2. Calculate the actual cost of inputs for 2015. If required, round your answers to the nearest dollar
Cost of Labor = 240,000 x $18
.......................= $4,320,000
Cost of Materials = 1,600,000 x $3.6
............................= $5,760,000
Total PQ Cost = $4,320,000 + $5,760,000
.......................= $10,080,000
Net Value of the productivity changes = $11,280,000 - $10,080,000
............................................................= $1,200,000
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 = $2,880,000 - $4,320,000
..........................................= - $1,440,000
Materials productivity change = $8,640,000 - $5,760,000
...............................................= $2,880,000
3. What if a manager wants to know how much of the total profit change from 2014 to 2015 is attributable to price recovery? Calculate the total profit change
Total change in profit = $1,920,000 - $95,000
..................................= $1,825,000
Price Recovery Component = (480,000 x $2) - (240,000 x $2) - (1,600,000 x $0.10)
.............................................= $960,000 - $480,000 - $160,000
.............................................= $320,000
2014 2015 Sales $13,110,000 $12,000,000 Less: Material Cost $9,975,000 $5,760,000 Labor cost $3,040,000 $4,320,000 Profit $95,000 $1,920,000Related Questions
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