Zychol Chemicals Corporation
Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his quarterly report, which is to include a productivity analysis for his department. One of the inputs is production data prepared by Sharon Walford, his operations analyst. The report, which she gave him this morning, showed the following:
| |
2008
|
2009
|
|
Production (units)
|
4,500
|
6,000
|
|
Raw material used (barrels of petroleum by-products)
|
700
|
900
|
|
Labor hours
|
22,000
|
28,000
|
|
Capital cost applied to the department ($)
|
$375,000
|
$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.
Management's expectation for departments such as Mr. Richards's is an annual productivity increase of 5%.
Required:
1. Prepare the productivity part of the report for Mr. Richards. Provide calculations for:
A. Change year-over-year for each of the factors
B. Single-factor productivity
C. Multi-factor productivity
2. End the report by providing Mr. Richards your personal assessment of your findings (Was the annual productivity increase of 5% met?What does the data mean or allude to? What can management expect in future years?)