Information about Bodacious Corporation is as follows: $\begin{array}{lcr}&2018&2019\
\text { Output (units) } & 120,000 & 126,000 \
\text { Selling price per unit } & \$ 25 & \$ 25\\
\text { Input quantities: }\
\text { Materials (pounds) }&6,000&6,000\
\text { Labor (hours) }&4,800&4,825\\
\text { Input prices: }\
\text { Materials (per pound) }&\$5.00&\$5.50\
\text { Labor (per hour) }&\$7.00&\$7.50
\end{array}$ By how much did profits change as a result of changes in productivity related to labor?
A)$1,237.50 increase
B)$1,650.00 increase
C)$1,650.00 decrease
D)$1,237.50 decrease

Question

Quizplus · Accepted Answer

The change in productivity related to labor is the change in output per hour of labor. In 2018, the output per hour of labor was 120,000 units / 4,800 hours = 25 units per hour. In 2019, the output per hour of labor was 126,000 units / 4,825 hours = 26.11 units per hour. The change in output per hour of labor is 26.11 units per hour - 25 units per hour = 1.11 units per hour.The change in profits as a result of changes in productivity related to labor is the change in output per hour of labor multiplied by the selling price per unit and the number of hours of labor. In this case, the change in profits is 1.11 units per hour * $25 per unit * 4,825 hours = $1,237.50.

Information About Bodacious Corporation Is as Follows By How Much Did Profits Change as a Result of (units)