case study
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CASE STUDY:Zychol Chemicals Corporation
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Hi! I’m Bob Richards,
Production manager of Zychol
Chemicals, in Houston, Texas
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Hello there! I’m Sharon Walford
and I’m the company’s Operations
Analyst
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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
PRODUCTION DATA
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Labor cost per hour
$13 per hour
$14 per hour
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Average cost per barrel of raw
material$320 per
barrel
$360 per
barrel
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Capital Cost
$375,000
$620,000
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Prepare the productivity part of the report for Mr.
Richards.
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• Both labor and material productivity increased
• Net result is a large negative change in productivity.
• The effect of accounting procedures is often beyond the control of managers.
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What are the implications of the
change in the producer price index?
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• reduces the negative impact onthe capital allocation
• material costs are still higher in 2007 after adjustment for inflation
• negative 5% growth in productivity remains
• increase in the capital base is responsible yet should not persist in future years
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Did you
reach your
goal?