Concept explainers
Total factor productivity (continuation of 12-43). Refer to the data for Problem 12-43.
Assume the fabric costs $4.00 per yard In 2017 and $4.10 per yard in 2016.
- 1. Compute Gable Company’s total factor productivity (TFP) for 2017.
Required
- 2. Compare TFP for 2017 with a benchmark TFP for 2016 inputs based on 2017 prices and output.
- 3. What additional information does TFP provide that partial-productivity measures do not?
12-43 Partial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity. In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity.
Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000.
- 1. Calculate the partial-productivity ratios for materials and conversion (capacity costs) for 2017, and compare them to a benchmark for 2016 calculated based on 2017 output.
Required
- 2. How can Gable Company use the information from the partial-productivity calculations?
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Chapter 12 Solutions
HORNGREN'S COST ACCT-MYACCTLAB ACCESS
- This cost data from Hickory Furniture is for the year 2017. Using the high-low method, express the factory utility expenses as an equation where x represents number of chairs produced. Predict the utility costs if 900 chairs are produced. Predict the utility costs if 750 chairs are produced. Using Excel, create a scatter graph of the cost data and explain the relationship between number of chairs processed and utility expenses.arrow_forwardPartial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity. In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000. Assume the fabric costs $4.00 per yard in 2017 and $4.10 per yard in 2016. Q. Compute Gable Company’s total factor productivity (TFP) for 2017.arrow_forwardPartial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity. In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000. Q. Calculate the partial-productivity ratios for materials and conversion (capacity costs) for 2017, and compare them to a benchmark for 2016 calculated based on 2017 output.arrow_forward
- Partial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity. In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000. Assume the fabric costs $4.00 per yard in 2017 and $4.10 per yard in 2016. Q. Compare TFP for 2017 with a benchmark TFP for 2016 inputs based on 2017 prices and output.arrow_forwardPartial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity. In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000. Assume the fabric costs $4.00 per yard in 2017 and $4.10 per yard in 2016. Q.What additional information does TFP provide that partial-productivity measures do not?arrow_forwardVariable and absorption costing and breakeven points. Camino, a leading rm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,000 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):arrow_forward
- Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: 1 Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs: 3 Direct materials — $46.00 4 Direct labor — 40.00 5 Factory overhead $200,000.00 20.00 6 Selling expenses: 7 Sales salaries and commissions 110,000.00 8.00 8 Advertising 40,000.00 — 9 Travel 12,000.00 — 10 Miscellaneous selling expense 7,600.00 1.00 11 Administrative expenses: 12 Office and officers’ salaries 132,000.00 — 13 Supplies 10,000.00 4.00 14…arrow_forwardHorace Company manufactures a professional-grade vacuum cleaner and began operations in 2017. For 2017, Horace budgeted to produce and sell 25,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2017 are given in attatched picture: Q.Prepare a 2017 income statement for Horace Company using absorption costingarrow_forwardHorace Company manufactures a professional-grade vacuum cleaner and began operations in 2017. For 2017, Horace budgeted to produce and sell 25,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2017 are given in attatched picture: Q.Prepare a 2017 income statement for Horace Company using variable costing.arrow_forward
- Variable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,000 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):arrow_forwardChloe Enterprises operates a single-product entity. Data relating to the product for 2016were as follows. Annual volume 32 000 units Selling price per unit $60 Variable manufacturing cost per unit 28 Annual fixed manufacturing costs 120000 Variable marketing and distribution costs per unit 12 Annual fixed non-manufacturing costs 360000 Requireda. Calculate the break-even in both dollars and units for 2016.b. Calculate the margin of safety in both units and sales dollars.c. Calculate the profit achieved in 2016 given the annual volume of 32 000 units.d. Changes in marketing strategy are planned for 2017. This would increase variablemarketing and distribution costs by $4 per unit, and reduce fixed nonmanufacturingcosts by $80 000 per year. Calculate the units that would need tobe sold in 2017 to achieve the same profit as in 2016.e. Would you recommend the change? Explain.arrow_forwardAbsorption versus variable costing. Horace Company manufactures a professional-grade vacuum cleaner and began operations in 2017. For 2017, Horace budgeted to produce and sell 25,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2017 are given as follows:arrow_forward
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