Interperiod Measurement of Productivity, Profit-Linked Measurement Helena Compan

Question

Interperiod Measurement of Productivity, Profit-Linked Measurement

Helena Company needs to increase its profits and so has embarked on a program to increase its overall productivity. After one year of operation, Kent Olson, manager of the Columbus plant, reported the following results for the base period and its most recent year of operations:

Suppose the following input prices are provided for each year:

Required:

1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity?
$

2. Calculate the price-recovery component for 20x2.
$

20x1 20x2 Output 184,320      216,000      Power (quantity used) 23,040      10,800      Materials (quantity used) 46,080      48,600     

Explanation / Answer

2001 2002 Units 184320 216000 Power 23040 10800 Mate 46080 48600 Power rate 2 3 Mat price 16 15 Selling 6 8 Sales val 1105920 1728000 Power cost 46080 32400 Mate cost 737280 729000 Profit 322560 966600 Profit change 644040 Profit increased due to producivity approx 644040 Prince recovery component for 2002-   226.95% ( 1728000 / ( 32400+729000)

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