Refer to Cornerstone Exercise 15.3. Choctaw Company provides the following additional information so that total productivity can be valued:
2012 2013
Number of units produced .......... 540,000 ................ 450,000
Labor hours used ..................... 108,000 ................ 112,500
Materials used (lbs.) ............... 2,160,000 ............. 1,500,000
Unit selling price .......................... $20 ..................... $22
Wages per labor hour .................... $12 ...................... $14
Cost per pound of material ............ $3.40 .................. $3.50
Required:
1. Calculate the cost of inputs in 2013, assuming no productivity change from 2012 to 2013.
2. Calculate the actual cost of inputs for 2013. What is the net value of the productivity changes? How much profit change is attributable to each input's productivity change?
3. What if a manager wants to know how much of the total profit change from 2012 to 2013 is attributable to price recovery? Calculate the price-recovery component, and comment on its meaning.