As the cost accounting manager at McKinley Industries (MI), you are responsible

Question

As the cost accounting manager at McKinley Industries (MI), you are responsible for compiling and reporting various performance measures to the senior managers. MI instituted many efficiency improvement programs recently and the CFO has asked you to measure and report total factor productivity based on three inputs (material, labor, and overhead). From the accounting records, you also gather the following information for the two years:

  

  

  

Compute the total factor productivity measures for year 1 and year 2 based on the three inputs (material, labor, and overhead). (Round your answers to 3 decimal places.)

Year 2 Year 1   Gallons input 46,000 41,300   Labor hours 50,200 39,800   Output (gallons) 26,800 20,700

Explanation / Answer

Answer: Total productivity = Value of output ÷ Value of inputs (materials, labor, and overhead).

Year 1 Total output level (20700*357) 7389900 Material value (41300*79) 3262700 Labor value (39800*9) 358200 Overhead value 3090000 6710900 Total factor Productivity 7389900/6710900 1.101

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