Patrick Cooper, the production manager of Cooper Cakes, is preparing his quarter
ID: 356290 • Letter: P
Question
Patrick Cooper, the production manager of Cooper Cakes, is preparing his quarterly report, which is to include a productivity analysis for his department. One of the inputs is cake production data prepared by Bell, his operations analyst. The report, which she gave him this morning, showed the following:
2015
2016
Production (units)
5,700
8,000
Raw material used (bags of cake ingredients)
650
950
Labor hours
23,500
26,500
Capital cost applied to the department ($)
$50,000
$80,000
Patrick knew that his labor cost per hour had increased from an average of $10 per hour to an average of $12 per hour, primarily due to a move by management to become more competitive with the new Sprinkles Cupcakes opening in the area. He also knew that his average cost per bag of raw material had increased from $5 to $7.50 per bag. He was concerned about the accounting procedures that increased his capital cost from $50,000 to $80,000, but earlier discussions with his boss suggested that there was nothing that could be done about that allocation.
Patrick wondered if his productivity had increased at all. He called Bell into the office and conveyed the above information to her and asked her to prepare this part of the report.
Prepare the productivity part of the report for Mr. Cooper .
1. Provide ONE numerical answer in percentage for:
Change year-over-year for production = _____ % (By what percentage did production change from 2015 to 2016?)
2. Provide one numerical answer for single factor productivity in Units/Dollar:
Raw material cost productivity for 2015:
= _____ Units/Dollar
3. Provide calculations for single factor productivity in Units/Labor hour:
Single factor productivity for labor hours in 2015
= _____ Units/Labor hour
4. Prepare the productivity part of the report for Mr. Cooper .
Provide calculations for single factor productivity in Units/Dollar
Raw material cost productivity for 2016:
= _____ Units/Dollar
5. Provide calculations for multifactor productivity in Units/Dollar for 2015
Multifactor productivity for 2015:
= _____ Units/Dollar
6. Provide calculations for multifactor productivity in Units/Dollar for 2016
Multifactor productivity for 2016 (round to 4 decimal places):
= _____ Units/Dollar
7. Management’s expectation for departments such as Mr. Richards’s is an annual productivity increase of 7%. Did he reach this goal?
2015
2016
Production (units)
5,700
8,000
Raw material used (bags of cake ingredients)
650
950
Labor hours
23,500
26,500
Capital cost applied to the department ($)
$50,000
$80,000
Explanation / Answer
Let me try and explain the concept to you here - we are going to mainly focus on partial productivity, which is also called single factor productivity in the question here. This means you measure the productivity with respect to a single output.
There are 7 questions here, so I will help you out with the first 4. You should be able to do the rest based on your understanding of the concept here.
The given data:
2015
2016
Production (units)
5,700
8,000
Raw material used (bags of cake ingredients)
650
950
Labor hours
23,500
26,500
Capital cost applied to the department ($)
$50,000
$80,000
Q1. Change year-over-year for production = _____ % (By what percentage did production change from 2015 to 2016?)
Productivity in 2015: 5700 units
Productivity in 2016: 8000 units
(Data is from the table above)
Hence, the % change = (Production in 2016 - Production in 2015) x 100/(Production in 2015)
% change = (8000 - 5700) / 5700 = 2300/5700 = 40.35%
Hence, the % change in production = 40.35%
Q2. Raw material cost productivity for 2015:
= _____ Units/Dollar
As explained earlier, we need to calculate the single factor productivity, which is the productivity measured against one single input.
In our case, the required productivity = (production in 2015)/(raw material cost in 2015)
Calculation of raw material cost:
Raw material used in 2015: 650 bags
Cost per bag = $5
Hence, total cost = 650 x 5 = $3250
Hence, the required productivity = (production in 2015)/(raw material cost in 2015)
which is equal to 5700/3250 = 1.75 units/dollar
Required answer = 1.75 units per dollar
Q3. Single factor productivity for labor hours in 2015
= _____ Units/Labor hour
Going by the same definition of single factor productivity, the required productivity will be given by:
(Production in 2015)/(Labour Hours used in 2015)
Here, both the data is available from the table:
Production in 2015 = 5700 units
Labour hours in 2015 = 23500 hours
Hence, the required productivity = 5700/23500 = 0.24 units/labour hour
Hence, the required answer = 0.24 units/labour hour
Q4. Raw material cost productivity for 2016:
= _____ Units/Dollar
This is similar to question 2 - only the year has changed
Let us calculate the raw material cost for 2016:
Bags of raw material used = 950 bags
Cost per bag = $7.50
Hence, total cost = 7.50 x 950 = $7125
Production in 2016 = 8000 units.
Required productivity = (Production in 2016) / (Raw material cost for 2016)
which is 8000/7125 = 1.12 units/dollar
Hence, the required answer = 1.12 units/dollar
Do note and appreciate how this productivity has fallen from 2015.
2015
2016
Production (units)
5,700
8,000
Raw material used (bags of cake ingredients)
650
950
Labor hours
23,500
26,500
Capital cost applied to the department ($)
$50,000
$80,000