A productivity index of 110% means that a company’s labor costs would have been

Question

A productivity index of 110% means that a company’s labor costs would have been 10% higher if it had not made production improvements. Assume that Baldwin had a productivity index of 112% and that Chester had a productivity index of 103%. Now refer to the Income Statements in the Annual Report for Baldwin and Chester. Using the labor costs shown in the Income Statements, how much more did Baldwin save in direct labor costs compared to Chester by having a higher productivity index?

Select: 1 $3,188 $3,507 $3,347 $2,869

Liabilities & Owner's Equity LIABILITIES Assets CURRENT ASSETS Cash Accts Receivable $39,903 $13,725 $ 32,010 Accts Payable Current Borrowing Emergency Loan Maturing L.T. Debt Long Term Debt 6.9% 9,102 $ 0 30.3% 10.4%, 24.3% 65.1%, 0.0% 0.0% 20 7% 2755%; Total Current Assets $85,638 $ 0 $27,209 FIXED ASSETS Plant&Equipment; $96,824 $ 50,865) 736% (38.7%)| 34.9% Total Liabilities $36,311 | OWNER'S EQUITY Accum. Deprec. Total Fixed Assets TOTAL ASSETS Common Stock Retained Earn. $12,081 $83,206 $45,959 $131,597 92% 63.2% 72.4% 100.0% 100.0% Total Equity TOTAL LIAB. & O.E 95,287 $131,597

Explanation / Answer

Baldwin direct labour cost = 32584, It productive index indicates that the cost could have been higher by = 32584*12% = 3910.08$

Chester direct labour cost = 24191, It productive index indicates that the cost could have been higher by = 24191*3% = 725.73$

Thus savings in cost = 3910.08-725.73 = 3188$

Thus ans 3188$

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