Productivity and Quality: Prospective Analysis Analytic Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections. Current System Computerized System Output (units) 30,000 30,000 Output selling price $40 $40 Input quantities: Materials 120,000 105,000 Labor 60,000 45,000 Capital (dollars) $60,000 $300,000 Energy 30,000 75,000 Input prices: Materials $4.00 $5.00 Labor $9.00 $10.00 Capital (percent) 10.00% 10.00% Energy $2.00 $3.00 Required: 1. Compute the partial operational ratios for materials and labor under each alternative. If required, round your answers to two decimal places. Current system Computerized system Materials Labor Is the production manager right in thinking that materials and labor productivity increase with the automated system?Yes 2. Compute the productivity profiles for each system. If required, round your answers to two decimal places. Current System Computerized System Materials Labor Capital Energy Does the computerized system improve productivity?Results are mixed - trade-offs must be valued 3. Determine the amount by which profits will change if the computerized system is adopted.

Productivity and Quality: Prospective Analysis Analytic Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections. Current System Computerized System Output (units) 30,000 30,000 Output selling price $40 $40 Input quantities: Materials 120,000 105,000 Labor 60,000 45,000 Capital (dollars) $60,000 $300,000 Energy 30,000 75,000 Input prices: Materials $4.00 $5.00 Labor $9.00 $10.00 Capital (percent) 10.00% 10.00% Energy $2.00 $3.00 Required: 1. Compute the partial operational ratios for materials and labor under each alternative. If required, round your answers to two decimal places. Current system Computerized system Materials Labor Is the production manager right in thinking that materials and labor productivity increase with the automated system?Yes 2. Compute the productivity profiles for each system. If required, round your answers to two decimal places. Current System Computerized System Materials Labor Capital Energy Does the computerized system improve productivity?Results are mixed - trade-offs must be valued 3. Determine the amount by which profits will change if the computerized system is adopted.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 7E: Rachel Boyce, president of a company that manufactures electronic components, has a number of...

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Productivity and Quality: Prospective Analysis

Analytic Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections.

	Current System	Computerized System
Output (units)	30,000	30,000
Output selling price	$40	$40
Input quantities:
Materials	120,000	105,000
Labor	60,000	45,000
Capital (dollars)	$60,000	$300,000
Energy	30,000	75,000
Input prices:
Materials	$4.00	$5.00
Labor	$9.00	$10.00
Capital (percent)	10.00%	10.00%
Energy	$2.00	$3.00

Required:

1. Compute the partial operational ratios for materials and labor under each alternative. If required, round your answers to two decimal places.

	Current system	Computerized system
Materials
Labor

Is the production manager right in thinking that materials and labor productivity increase with the automated system?
Yes

2. Compute the productivity profiles for each system. If required, round your answers to two decimal places.

	Current System	Computerized System
Materials
Labor
Capital
Energy

Does the computerized system improve productivity?
Results are mixed - trade-offs must be valued

3. Determine the amount by which profits will change if the computerized system is adopted.

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