Power Company has been unhappy with the financial accounting variances that its cost accounting system has been producing,because its managers believe that there is more to evaluating an operation than just examining accounting numbers.Therefore,it has started gathering data to assist in the examination of nonfinancial results of operations.The following information relates to the manufacture of remote control units for televisions,radios,and stereo components:
$\begin{array}{lrr}&2011&2012\
\text { Remote control units produced and sold } & 80,000 & 100,000 \
\text { Direct manufacture labor-hours } & 12,000 & 13,200 \
\text { Direct materials used (sets) } & 80,600 & 100,500 \
\text { Direct manufacture cost per hour } & \$ 18 & \$ 20 \
\text { Direct materials cost per set } & \$ 31 & \$ 32
\end{array}$ Required:
a.What is the partial productivity of direct materials for each year?
b.What is the partial productivity of direct manufacturing labor for each year?
c.Did each area improve between 2011 and 2012? Explain.
d.What will be the projected direct material and labor needs for 2013 if remote control units increase by 12,000 units,assuming Power Company applies the constant returns to scale technology?

Question

Power Company has been unhappy with the financial accounting variances that its cost accounting system has been producing,because its managers believe that there is more to evaluating an operation than just examining accounting numbers.Therefore,it has started gathering data to assist in the examination of nonfinancial results of operations.The following information relates to the manufacture of remote control units for televisions,radios,and stereo components:
 $\begin{array}{lrr}&2011&2012\
\text { Remote control units produced and sold } & 80,000 & 100,000 \
\text { Direct manufacture labor-hours } & 12,000 & 13,200 \
\text { Direct materials used (sets) } & 80,600 & 100,500 \
\text { Direct manufacture cost per hour } & \$ 18 & \$ 20 \
\text { Direct materials cost per set } & \$ 31 & \$ 32
\end{array}$ Required:
a.What is the partial productivity of direct materials for each year?
b.What is the partial productivity of direct manufacturing labor for each year?
c.Did each area improve between 2011 and 2012? Explain.
d.What will be the projected direct material and labor needs for 2013 if remote control units increase by 12,000 units,assuming Power Company applies the constant returns to scale technology?

Quizplus · Accepted Answer

The Answer of Power Company has been unhappy with the financial accounting variances that its cost accounting system has been producing,because its managers believe that there is more to evaluating an operation than just examining accounting numbers.Therefore,it has started gathering data to assist in the examination of nonfinancial results of operations.The following information relates to the manufacture of remote control units for televisions,radios,and stereo components:
 $\begin{array}{lrr}&2011&2012\
\text { Remote control units produced and sold } & 80,000 & 100,000 \
\text { Direct manufacture labor-hours } & 12,000 & 13,200 \
\text { Direct materials used (sets) } & 80,600 & 100,500 \
\text { Direct manufacture cost per hour } & \$ 18 & \$ 20 \
\text { Direct materials cost per set } & \$ 31 & \$ 32
\end{array}$ Required:
a.What is the partial productivity of direct materials for each year?
b.What is the partial productivity of direct manufacturing labor for each year?
c.Did each area improve between 2011 and 2012? Explain.
d.What will be the projected direct material and labor needs for 2013 if remote control units increase by 12,000 units,assuming Power Company applies the constant returns to scale technology?

Power Company Has Been Unhappy with the Financial Accounting Variances