COST MANAGEMENT: STRATEGIC W/CONNECT
8th Edition
ISBN: 9781264192427
Author: BLOCHER
Publisher: MCG CUSTOM
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Question
Chapter 16, Problem 44P
1.
To determine
Prepare summary of contribution income statement for two years and determine the changes in operating income.
1.
Expert Solution
Explanation of Solution
| "C" Company Comparative Income Statement For the year ended | ||||
| Current year | Prior year | |||
| Sales | 20,000 × $40 | $800,000 | 16,000 × $40 | $640,000 |
| Variable cost of sales: | ||||
| Direct materials | 14,000 × $10 | $140,000 | 13,000 × $8 | $104,000 |
| Direct labor | 5,250 × $25 | $131,250 | 6000×$20 | $120,000 |
| Power | 2,000 × $2 | $4,000 | 1,000 × $2 | $2,000 |
| Total variable costs of sales | $275,250 | $226,000 | ||
| Contribution margin | $524,750 | $414,000 | ||
Compute the changes in operating net income:
2.
To determine
Determine the partial operational productivity for each production factor.
2.
Expert Solution
Explanation of Solution
| Particulars | Current year | Prior year | ||
| Total direct materials cost | $140,000.00 | ( 14,000×$10) | $104,000.00 | ( 14,000×$8) |
| Total direct labor cost | $131,250.00 | (5,250×$25) | $120,000.00 | (5,250×$25) |
| Total power cost | $4,000.00 | (2,000×$2) | $2,000.00 | (1,000×$2) |
| Operational partial productivity | ||||
| Direct materials | $1.4286 | (20,000 by $14,000) | 0.1538 | (16,000 by $14,000) |
| Direct labor | $3.8095 | (20,000 by $5,250) | 0.1333 | (16,000 by $5,250) |
| Power | $10.0000 | (20,000 by $2,000) | 8.0000 | (16,000 by $2,000) |
| Current output prior year productivity | ||||
| Direct materials | $16,250 | (20,000 by $1.2308) | ||
| Direct labor | $7,500 | (20,000 by $2.6667) | ||
| Power | $1,250 | (20,000 by $16) |
3.
To determine
Determine the partial financial productivity for each production factor.
3.
Expert Solution
Explanation of Solution
| Particulars | Current year | Prior year | ||
| Total direct materials cost | $140,000.00 | ( 14,000×$10) | $104,000.00 | ( 14,000×$8) |
| Total direct labor cost | $131,250.00 | (5,250×$25) | $120,000.00 | (5,250×$25) |
| Total power cost | $4,000.00 | (2,000×$2) | $2,000.00 | (1,000×$2) |
| Financial partial productivity | ||||
| Direct materials | $0.1429 | (20,000 by $140,000) | $0.1538 | (16,000 by $104,000) |
| Direct labor | $0.1524 | (20,000 by $131,250) | $0.1333 | (16,000 by $120,000) |
| Power | $5.0000 | (20,000 by $4,000) | $8.0000 | (16,000 by $2,000) |
| Operational partial productivity | ||||
| Direct materials | $1.4286 | (20,000 by $14,000) | 0.1538 | (16,000 by $14,000) |
| Direct labor | $3.8095 | (20,000 by $5,250) | 0.1333 | (16,000 by $5,250) |
| Power | $10.0000 | (20,000 by $2,000) | 8.0000 | (16,000 by $2,000) |
| Current output prior year productivity | ||||
| Direct materials | $16,250 | (20,000 by $1.2308) | ||
| Direct labor | $7,500 | (20,000 by $2.6667) | ||
| Power | $1,250 | (20,000 by $16) |
4.
To determine
Explain the conclusions about the productivity of the firm.
4.
Expert Solution
Explanation of Solution
The productivity of direct materials and direct labor is increased compared to the previous year to current year. During the current year, the company is under a situation to manufacture the more output unit for each unit of material used in production. The operational productivity in the current year is decreased compared to the previous year.
The financial partial productivity for labor is increased. Thus, decrease in the financial productivity will increase the direct labor wage rate.
5.
To determine
Prepare schedule to changes in partial financial productivity ratios from previous year to current year.
5.
Expert Solution
Explanation of Solution
The schedule of changes in partial financial productivity ratios from previous year to current year is as follows:
| Current output prior year productivity | (A) Current input cost | Change in productivity (A-B) | (B) Current input cost | Change in input price (B-C) | (C ) Prior input cost | Output changes (C-D) | (D ) Prior input cost | Total Changes | |
| Direct materials | $0.1429 | $0.0198 | 0.1231 | -$0.0308 | $0.1539 | $0.0001 | $0.1538 | -$0.0109 | |
| Direct labor | $0.1524 | $0.0457 | 0.1067 | -$0.0266 | $0.1333 | $0.00 | $0.1333 | $0.0191 | |
| Power | $5.0000 | -$3.0000 | 8.0000 | $0.00 | $8.0000 | $0.00 | $8.0000 | -$3.0000 | |
6.
To determine
Indicate whether the detailed information will provide any additional insight about the relative productivity of “C”.
6.
Expert Solution
Explanation of Solution
The productivity of direct materials and direct labor is increased compared to the previous year to current year. Hence, increase in cost of direct materials and direct labor will decrease the amount of gain in productivity of both the manufacturing companies.
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Chapter 16 Solutions
COST MANAGEMENT: STRATEGIC W/CONNECT
Ch. 16 - Prob. 1QCh. 16 - Prob. 2QCh. 16 - Prob. 3QCh. 16 - What is operational productivity? Financial...Ch. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - Prob. 9QCh. 16 - Prob. 10Q
Ch. 16 - Prob. 11QCh. 16 - Prob. 12QCh. 16 - Prob. 13QCh. 16 - Prob. 14QCh. 16 - What is the difference between a sales quantity...Ch. 16 - “As long as a firm sells more units than the units...Ch. 16 - Prob. 17QCh. 16 - Prob. 18QCh. 16 - Prob. 19QCh. 16 - What are the relationships between a market size...Ch. 16 - Prob. 21QCh. 16 - Prob. 22BECh. 16 - Prob. 23BECh. 16 - Prob. 24BECh. 16 - Prob. 25BECh. 16 - Prob. 26BECh. 16 - Prob. 27BECh. 16 - Prob. 28BECh. 16 - Prob. 29ECh. 16 - Prob. 30ECh. 16 - Prob. 31ECh. 16 - Partial Financial Productivity ABC Corporation...Ch. 16 - Partial Operational and Financial...Ch. 16 - Prob. 34ECh. 16 - Prob. 35ECh. 16 - Prob. 36ECh. 16 - Prob. 37ECh. 16 - Prob. 38ECh. 16 - Prob. 39ECh. 16 - Prob. 40ECh. 16 - Prob. 41PCh. 16 - Prob. 42PCh. 16 - Prob. 43PCh. 16 - Prob. 44PCh. 16 - Prob. 45PCh. 16 - Prob. 46PCh. 16 - Prob. 48PCh. 16 - Prob. 49PCh. 16 - Prob. 50PCh. 16 - Prob. 51PCh. 16 - Prob. 52PCh. 16 - Prob. 53PCh. 16 - Prob. 54PCh. 16 - Prob. 55PCh. 16 - Prob. 56PCh. 16 - Prob. 57PCh. 16 - Prob. 58P
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