Janice Interiors installs custom interiors for luxury mobile homes. In its most recent negotiation with the union, the firm proposed to share productivity gains in direct labor equally with the union. In return, the union agreed not to demand wage increases. Most union members, however, are skeptical about management€™s honesty in calculating productivity measures. Nevertheless, union members voted to try the program. Kim Tomas, the management accountant responsible for determining productivity measures, collected these data at the end of the current year:

Steve Janice, the CEO, is very eager to demonstrate the firm€™s good intentions by showing the labor union a positive result. He suggests to Kim that some of the direct labor hours are actually indirect. For example, some of the labor hours are indirect because these hours cannot be allocated to specific types of work.

Required

In your calculations, use 4 significant digits after the decimal point.

1. Compute the partial labor productivity for each year.

2. Recompute the partial productivity for the current year assuming 8,000 hours are reclassified as indirect.

3. Would it be ethical for Kim to modify her calculations?

Transcribed Image Text:

Prior Year Current Year Number of installations Direct labor hours 560 115,000 500 99,000