Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 49

Partial Financial Productivity and Total Productivity ABC Corporation makes small parts from steel alloy sheets. Management has the flexibility to substitute direct materials for direct manufacturing labor. If workers cut the steel carefully, more parts can be manufactured from a metal sheet, but this requires additional direct manufacturing labor-hours. Alternatively, ABC can use fewer labor-hours if it is willing to tolerate more waste of direct materials. ABC decided to improve materials productivity in 2013 and the following provides information for 2012 and 2013:

Required Carry all computations to four digits after the decimal point.
1. Compute the partial financial productivity for both labor and materials for 2012 and 2013.
2. Calculate ABC's total productivity in units per dollar in 2012 and 2013.
3. Evaluate management's decision in 2013 to improve materials productivity.