For this question, use the the information from this case study: Bob Richards, t
ID: 354048 • Letter: F
Question
For this question, use the the information from this case study:
Bob Richards, the production manager of Stella Elements, in Boca Raton, Florida, is preparing his quarterly report, which is to include a productivity analysis for his department. One of the inputs is production data prepared by Alice Collins, his operations analyst. The report, which she gave him this morning, showed the following:
2015
2016
Production (units)
4,500
6,500
Raw material used (barrels of petroleum by-products)
700
910
Labor hours
22,000
25,500
Capital cost applied to the department ($)
$350,000
$410,000
Bob knew that his labor cost per hour had increased from an average of $12 per hour to an average of $15 per hour, primarily due to a move by management to become more competitive with a new company that had just opened a plant in the area. He also knew that his average cost per barrel of raw material had increased from $350 to $375. He was concerned about the accounting procedures that increased his capital cost from $350,000 to $410,000, but earlier discussions with his boss suggested that there was nothing that could be done about that allocation.
Bob wondered if his productivity had increased at all. He called Alice into the office and conveyed the above information to her and asked her to prepare this part of the report.
Prepare the productivity part of the report for Mr. Richards. Provide calculations in percentage for:
Change year-over-year (from 2015 to 2016) for production = _____ %
Prepare the productivity part of the report for Mr. Richards. Provide calculations for single factor productivity in Units/Labor hour:
Single factor productivity for labor hours in 2015
= _____ Units/Labor hour
Prepare the productivity part of the report for Mr. Richards. Provide calculations for single factor productivity in Units/Dollar
Raw material cost productivity for 2015:
= _____ Units/Dollar
Prepare the productivity part of the report for Mr. Richards. Provide calculations for single factor productivity in Units/Dollar
Raw material cost productivity for 2016:
= _____ Units/Dollar
Prepare the productivity part of the report for Mr. Richards. Provide calculations for multifactor productivity in Units/Dollar for 2015
Multifactor productivity for 2015 (round to 4 decimal places):
= _____ Units/Dollar
Prepare the productivity part of the report for Mr. Richards. Provide calculations for multifactor productivity in Units/Dollar for 2016
Multifactor productivity for 2016 (round to 4 decimal places):
= _____ Units/Dollar
Using the case study and your calculations above:
Management’s expectation for departments such as Mr. Richards’s is an annual productivity increase of 7%. Did he reach this goal? yes, or no?
2015
2016
Production (units)
4,500
6,500
Raw material used (barrels of petroleum by-products)
700
910
Labor hours
22,000
25,500
Capital cost applied to the department ($)
$350,000
$410,000
Explanation / Answer
Change year-over-year (from 2015 to 2016) for production = (6500 - 4500)/4500 = 44.44%
Single factor productivity for labor hours in 2015 = 4500 / 22000 = 0.2045 Units/Labor hour
Raw material cost productivity for 2015 = 4500/ (700 x 350) = 0.0183 Units/Dollar
Raw material cost productivity for 2016 = 6500/ (910 x 375) = 0.0190 Units/Dollar
Multifactor productivity for 2015
Total input ($) = labor (= 22000 x $12) + Raw material (= 700 x $350) + Capital ($350,000) = $859,000
Total output (units) = 4500
So, Multifactor productivity for 2015 = 4500 / 859000 = 0.0052 Units/ Dollar
Multifactor productivity for 2016
Total input ($) = labor (= 25500 x $15) + Raw material (= 910 x $375) + Capital ($410,000) = $1,133,750
Total output (units) = 6500
So, Multifactor productivity for 2015 = 6500 / 1133750 = 0.0057 Units/ Dollar
Productivity increase = (0.0057 - 0.0052) / 0.0052 = 9.44% (so, the goal of 7% is achieved)
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