At the End of 2018, San Leandro Company Implemented a New

question 42

Essay

At the end of 2018, San Leandro Company 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: $\begin{array}{lrr}&2018&2019\\\text { Output } & 20,000&24,000 \\\text { Output prices } & \$ 10 & \$ 10 \\\text { Materials (lbs.) } & 10,000 & 10,200 \\\text { Materials unit price } & \$ 3& \$4 \\\text { Labor (hrs.) } & 8,000&7,500 \\\text { Labor rate per hour } & \$ 5& \$ 5 \\\text { Power (kwh) } & 5,000&6,500 \\\text { Price per kwh } & \$ 2& \$ 3\end{array}$
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 2019. What can be said about the productivity program?
d.Calculate the price-recovery component. What does this tell you?

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Definitions:

Uncertain Inputs

Variables in a model or decision-making process whose values are not known with certainty, often requiring risk analysis or simulation to manage.

Assumptions

Foundational ideas accepted as true without proof, used as the basis for reasoning or argument.

Crystal Ball

A predictive analytics software offering risk analysis, simulation, and forecasting functionalities, often used for project management and financial forecasting.

Monte Carlo Simulation

A computational technique that uses random sampling to approximate the probability of various outcomes in a process.