At the End of 2018, Immaculate Productions Implemented a New

question 96

Essay

At the end of 2018, Immaculate Productions 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:
$\begin{array}{lrr}&2018&2019\\\text { Output } & 20,000 & 24,000 \\\text { Output prices } & \$ 20 & \$ 20 \\\text { Materials (lbs.) } & 16,000 & 16,800 \\\text { Materials unit price } & \$ 6 & \$ 8 \\\text { Labor (hrs.) } & 10,000 & 9,600 \\\text { Labor rate per hour } & \$ 10 & \$ 10 \\\text { Power (kwh) } & 4,000 & 6,000 \\\text { Price per kwh } & \$ 2 & \$ 3\end{array}$
Required:
a.Compute the partial operational measures for each input for both 2018 and 2019. What can be said about productivity improvement?
b.Prepare an income statement for each year and calculate the total change in profits.
c.Calculate the profit-linked productivity measure for 2018. What can be said about the productivity program?
d.Calculate the price-recovery component. What does this tell you?

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Definitions:

Total-revenue Curve

A graphical representation that shows how a company's total revenue changes in response to changes in the quantity of goods or services sold.

Linear Demand Curve

A representation of the relationship between the price of a good and the quantity demanded, characterized by a constant slope, indicating a steady change in demand relative to price.

Elastic

Describes a situation where the quantity demanded or supplied of a product changes significantly in response to a change in price.

Illinois Central Railroad

A historic American railroad that operated in the central United States, particularly known for its role in the development of the railway network from the Great Lakes to the Gulf of Mexico.