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At the end of Year 1, Cardigan Corporation implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of Year 2, the president of the company wants an assessment of the changes on the company's productivity. The data needed for the assessment are as follows:   Year 1 Year 2 Output 20,000 24,000 Output prices    $10       $10       Change in profits $22,200       Profit-linked measurements:         Materials $7,200     Labor  10,500     Power   (1,500) ​ What is the price-recovery component?   a. $6,000   b. $(6,000)   c. $22,200   d. $16,200

At the end of Year 1, Cardigan Corporation implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of Year 2, the president of the company wants an assessment of the changes on the company's productivity. The data needed for the assessment are as follows:   Year 1 Year 2 Output 20,000 24,000 Output prices    $10       $10       Change in profits $22,200       Profit-linked measurements:         Materials $7,200     Labor  10,500     Power   (1,500) ​ What is the price-recovery component?   a. $6,000   b. $(6,000)   c. $22,200   d. $16,200

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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  1. At the end of Year 1, Cardigan Corporation implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of Year 2, the president of the company wants an assessment of the changes on the company's productivity. The data needed for the assessment are as follows:

     

    Year 1

    Year 2
    Output

    20,000

    24,000
    Output prices

       $10

          $10
         
    Change in profits

    $22,200
         
    Profit-linked measurements:    
        Materials

    $7,200
        Labor

     10,500
        Power

      (1,500)

    ​

    What is the price-recovery component?

      a.
    $6,000
      b.
    $(6,000)
      c.
    $22,200
      d.
    $16,200
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