Interperiod Measurement of Productivity, Profit-Linked Measurement Helena Company needs to increase its profits and so has embarked on a program to increase its overall productivity. After one year of operation, Kent Olson, manager of the Columbus plant, reported the following results for the base period and its most recent year of operations: 20x1 20x2 Output 184,500 216,200 Power (quantity used) 23,063 10,700 Materials (quantity used) 46,125 47,200 Suppose the following input prices are provided for each year: 20x1 20x2 Unit price (power) $ 4 S 5 Unit price (materials) 18 17 Unit selling price 10 12 Required: 1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity? If required, round your intermediate calculations and final answers to the nearest dollar amount. Sfill in the blank 1 2. Calculate the price-recovery component for 20x2. If required, round your intermediate calculations and final answers to the nearest dollar amount. Sfill in the blank 2
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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