Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 29

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 this year and the following provides information for the current and prior year:

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