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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

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter15: Lean Accounting And Productivity Measurement
Section: Chapter Questions
Problem 16E
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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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