At the end of 2018, Diatomic Company implemented a new labor process and redesigned its product with the expectation that input usage efficiency would increase. Now, at the end of 2019, the president of the company wants an assessment of the changes on the company's productivity. The data needed for the assessment are as follows: $\begin{array}{lrr}&2019&2018\
\text { Output } & 45,000 & 54,000 \
\text { Output prices } & \$ 10 & \$ 10 \
\text { Materials (lbs.) } & 22,500 & 22,950 \
\text { Materials unit price } & \$ 3 & \$4 \
\text { Labor (hrs.) } & 18,000 & 16,875 \
\text { Labor rate per hour } & \$ 5 & \$ 5 \
\text { Power (kwh) } & 11,250 & 14,625 \
\text { Price per kwh } & \$ 2 & \$ 3
\end{array}$ By how much did profit change as a result of profitability changes in labor?
A)$5,625 increase
B)$45,000 increase
C)$23,625 increase
D)$23,625 decrease

Question

Quizplus · Accepted Answer

The change in profit due to profitability changes in labor is calculated as follows:Change in labor cost = (Labor rate per hour in 2019 * Labor hours in 2019) - (Labor rate per hour in 2018 * Labor hours in 2018)= ($5 * 18,000) - ($5 * 16,875)= $90,000 - $84,375= $5,625Change in profit = Change in labor cost= $5,625Therefore, the profit increased by $5,625 as a result of profitability changes in labor.

At the End of 2018, Diatomic Company Implemented a New