Extracted text: Zychol Chemicals Corporation
Bob Richards, the production manager of Zychol...

Question

Extracted text: Zychol Chemicals Corporation
Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his
quarterly report, which is to include a productivity analysis for his department. One of the inputs is
production data prepared by Sharon Walford, his operations analyst. The report, which she gave him
this morning, showed the following:
2006
2007
Production (units)
4,500
6,000
Raw material used (barrels of petroleum by-products)
700
900
Labor hours
22,000
28,000
Capital cost applied to the department ($)
$375,000
$620,000
Bob knew that his labor cost per hour had increased from an average of $13 per hour to an average of
$14 per hour, primarily due to a move by management to become more competitive with a new
company that had just opened a plant in the area. He also knew that his average cost per barrel of
raw material had increased from $320 to $360. He was concerned about the accounting procedures
that increased his capital cost from $375,000 to $620,000, but earlier discussions with his boss
suggested that there was nothing that could be done about that allocation.
Bob wondered if his productivity had increased at all. He called Sharon into the office and conveyed
the above information to her and asked her to prepare this part of the report.
Discussion Questions
1. Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis of
productivity inputs for all factors, as well as a multifactor analysis for both years with the change in
productivity (up or down) and the amount noted.
2. The producer price index had increased from 120 to 125, and this fact seemed to indicate to Mr.
Richards that his costs were too high. What do you tell him are the implications of this change in the
producer price index?
3. Management's expectation for departments such as Mr. Richards's is an annual productivity
increase of 5%. Did he reach this goal?

Rachit · Accepted Answer

OPERATIONS MANAGEMENTS
ANS 1
	Production Analysis
	2006
	2007
	At $13 Rate
	Production (Units)
	             4,500 
	             6,000 
	4500
	6000
	Per Unit Raw Material
	                0.16 
	                0.15 
	          0.16 
	          0.15 
	Per Unit Labour Hour
	                4.89 
	                4.67 
	        63.56 
	        60.67 
	Per Unit Capita
	 
	 
	Efficiency
	5%
	Production Analysis
	2006
	2007
	Production Change at $320
	Production (Units)
	             4,500 
	             6,000 
	4500
	                   6,000.00 
	Per Unit Raw Material
	                0.

Zychol Chemicals Corporation Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his quarterly report, which is to include a productivity analysis for his...

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