Date post: | 22-Nov-2014 |
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CASE STUDY:Zychol Chemicals Corporation
Hi! I’m Bob Richards,
Production manager of Zychol
Chemicals, in Houston, Texas
Hello there! I’m Sharon Walford
and I’m the company’s Operations
Analyst
2006 2007
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
PRODUCTION DATA
Labor cost per hour
$13 per hour
$14 per hour
Average cost per barrel of raw
material$320 per
barrel
$360 per
barrel
Capital Cost
$375,000
$620,000
Prepare the productivity part of the report for Mr.
Richards.
• Both labor and material productivity increased
• Net result is a large negative change in productivity.
• The effect of accounting procedures is often beyond the control of managers.
What are the implications of the
change in the producer price index?
• reduces the negative impact onthe capital allocation
• material costs are still higher in 2007 after adjustment for inflation
• negative 5% growth in productivity remains
• increase in the capital base is responsible yet should not persist in future years
Did you
reach your
goal?