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Zychol chemicals corporation case study solution

08/04/2021 Client: muhammad11 Deadline: 2 Day

Can you help me understand this Management question?

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 $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.

Management’s expectation for departments such as Mr. Richards’s is an annual productivity increase of 5%.

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