Refer to Exercise 15.14. Suppose the following input prices are provided for each year:
2012 2013
Unit price (power) .............. $ 2 ..................... $ 3
Unit price (materials) .......... 16 ....................... 15
Unit selling price ................ 6 ......................... 8
In Exercise 15.14
Helena Company needs to increase its profits and so has embarked on a program to increase its overall productivity. After one year of operation, Kent Olson, manager of the Columbus plant, reported the following results for the base period and its most recent year of operations:
2012 2013
Output .................................. 184,320 ............... 216,000
Power (quantity used) .................. 23,040 ................ 10,800
Materials (quantity used) ............... 46,080 ............... 48,600
Required:
1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity?
2. Calculate the price-recovery component for 2013. Explain its meaning.