Bob Richards is production manager of Zychol Chemicals, in Houston Texas, is making his quarterly report, which is to include a productivity examine for his section. One of the inputs is production data prepared by Sharon Walford, his operations analyst. The report she gave him this morning, showed the following:
Production (units) 2006: 4,500 2007: 6,000
Raw material used (barrels of
petroleum by-products) 2006: 700 2007: 900
Labor hours 2006: 22,000 2007: 28,000
Capital cost applied to the
department ($) 2006: $375,000 2007: $620,000
Bob knew that his labor cost per hour had increased from an average of $13 per hour to an average of $14 per hour, primarily due to a move by management to become more competitive with a new company that had just opened a plant in the area. He also knew that his average cost per barrel of raw material had increased from $320 to $360. He was concerned about the accounting procedures that increased his capital cost from $375,000 to $620,000, but earlier discussions with his boss suggested that there was nothing that could be done about that allocation. Bob wondered if his productivity had increased at all. He called Sharon into the office and conveyed the above information to her and asked her to prepare this part of the report.
1) Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis of productivity inputs for all factors, as well as a multifactor analysis for both years with the change in productivity (up or down) and the amount noted.
2) Management's expectation for departments such as Mr. Richard's is an annual productivity increase of 5%. Did he reach his goal?