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Read the case Zychol Chemicals Corporation given below and concisely answer the questions that follow at the end of the case study.
Read the case Zychol Chemicals Corporation given below and concisely answer the questions thatfollow at the end of the case study. As a general guideline, please try to limit your answers to a paragraphor two for each of the questions.Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his quarterlyreport, which is to include a productivity analysis for his department. One of the inputs is production dataprepared by Sharon Walford, his operations analyst. The report, which she gave him this morning,showed the following:2006 2007Production (units) 4,500 6,000Raw material used (barrels of petroleum by-products) 700 900Labor hours 22,000 28,000Capital cost applied to the department ($) $375,000 $620,000Bob knew that his labor cost per hour had increased from an average of $13 per hour to an average of $14per hour, primarily due to a move by management to become more competitive with a new company thathad just opened a plant in the area. He also knew that his average cost per barrel of raw material hadincreased from $320 to $360. He was concerned about the accounting procedures that increased hiscapital cost from $375,000 to $620,000, but earlier discussions with his boss suggested that there wasnothing that could be done about that allocation.Bob wondered if his productivity had increased at all. He called Sharon into the office and conveyed theabove information to her and asked her to prepare this part of the report.3a) Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis ofproductivity inputs for all factors, as well as a multifactor analysis for both years with the change inproductivity (up or down) and the amount noted.b) 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 theproducer price index?c) Managements expectation for departments such as Mr. Richardss is an annual productivity increaseof 5%. Did he reach this goal?
