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Name: Productivity Measurement, Basics Khan Company produces handcrafted leather purses. Virtually all of the manufacturing cost consists of materials and labor. Over the past several…
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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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please please answer all requirements correctly with all working and steps so that I can understand clearly thanks need correct answer million thanks

Transcribed Image Text:Required: 1. Compute the productivity profile for each year. If required, round your answers to two decimal places. 20x1 20x2 Materials Do the profiles indicate an overall productivity increase and thus support the effectiveness of the new process? Yes Labor 2. Compute the increase in profits attributable to increased productivity. Feedback 3. Calculate the price-recovery component. Enter a decrease in profit as a negative amount. Check My Work 1. Calculate the productivity profiles. How much of each of the two resources is used per unit produced? Are there improvements? 2. Calculate the cost of the inputs that would have been used in the absence of any productivity change and compare this cost with the cost of the inputs actually used. The difference in costs is the amount by which profits changed because of productivity changes. 3. How does the total profit change factor into the calculation for price recovery?

Transcribed Image Text:Productivity Measurement, Basics Khan Company produces handcrafted leather purses. Virtually all of the manufacturing cost consists of materials and labor. Over the past several years, profits have been declining because the cost of the two major inputs has been increasing. Lila Khan, the president of the company, has indicated that the price of the purses cannot be increased; thus, the only way to improve or at least stabilize profits is to increase overall productivity. At the beginning of 20x2, Lila implemented a new cutting and assembly process that promised less materials waste and a faster production time. At the end of 20x2, Lila wants to know how much profits have changed from the prior year because of the new process. In order to provide this information to Lila, the controller of the company gathered the following data: 20x2 Unit selling price Purses produced and sold Materials used 20x1 20x2 20x1 Materials $20 36,000 72,000 Labor used Unit price of materials Unit price of labor Required: 1. Compute the productivity profile for each year. If required, round your answers to two decimal places. 18,000 Labor $4 $20 $9 48,000 80,000 20,000 $5.00 $10

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