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Additional Case Study: Zychol Chemicals Corporation to accompany CHAPTER 1: Operations and Productivity
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:
2008
2009
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 $300 to $303. 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
Provide your answers to each question in MS Word. Attach Excel sheet to show your computation work. Organize your responses in a professional way (print out preview function in Word and Excel will help).
1. Prepare the productivity part of the report for Mr. Richards. He probably expects a multifactor analysis for both years plus the change in productivity (up or down) and the amount noted (30 points).
1) multifactor productivity in 2008?
2) multifactor productivity in 2009?
3) % change in the multifactor productivity between the two years?
4) Provide your conclusion explaining the source of the observed productivity change.
2. The producer price index (inflation) had increased from 120 to 135, and this fact seemed to indicate to Mr. Richards that his costs were too high. Using the PPI, recalculate the question above (#1). Explain the implications of this change in the producer price index (50 points).
1) Multifactor productivity for the 2009 using the given PPI?
2) % change in the multifactor productivity between the two years?
3) Provide your conclusion and compare it with your previous conclusion in #1 explaining why.
3. Management’s expectation for the departments such as Mr. Richards’s is an annual multifactor productivity increase of 5% (20 points)
1) Did he reach the goal?
2) If not, how many outputs are needed to achieve the goal?
3) What additional suggestions do you want to provide to accurately measure the productivity?
I need two files one excel and word for the answer