Profit-Linked Productivity Measurement In 20x2, Choctaw Company implements a new process affecting labor and materials. Choctaw Company provides the following information so that total productivity can be valued: 20x1 20x2 Number of units produced 570,000 480,000 Labor hours used 190,000 240,000 Materials used (lbs.) 2,850,000 1,600,000 Unit selling price $20 $22 Wages per labor hour $13 $15 Cost per pound of material $3.50 $3.60
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Profit-Linked Productivity Measurement
In 20x2, Choctaw Company implements a new process affecting labor and materials.
Choctaw Company provides the following information so that total productivity can be valued:
| 20x1 | 20x2 | |
| Number of units produced | 570,000 | 480,000 |
| Labor hours used | 190,000 | 240,000 |
| Materials used (lbs.) | 2,850,000 | 1,600,000 |
| Unit selling price | $20 | $22 |
| Wages per labor hour | $13 | $15 |
| Cost per pound of material | $3.50 | $3.60 |
Required:
1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2. If required, round your answers to the nearest dollar.
| Cost of labor | $fill in the blank 1 |
| Cost of materials | fill in the blank 2 |
| Total PQ cost | $fill in the blank 3 |
2. Calculate the actual cost of inputs for 20x2. If required, round your answers to the nearest dollar.
| Cost of labor | $fill in the blank 4 |
| Cost of materials | fill in the blank 5 |
| Total current cost | $fill in the blank 6 |
What is the net value of the productivity changes? If required, round your answers to the nearest dollar.
$fill in the blank 7
How much profit change is attributable to each input's productivity change? If an item is negative, use a minus (-) sign to indicate.
| Labor productivity change | $fill in the blank 8 |
| Materials productivity change | $fill in the blank 9 |
3. What if a manager wants to know how much of the total profit change from 20x1 to 20x2 is attributable to price recovery? Calculate the total profit change.
$fill in the blank 10
Calculate the price-recovery component.
$fill in the blank 11
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