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12-43 Partial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made...

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Accounting

12-43

Partial-productivity measurement. Gable Company manufactures wallets from fabric. In 2016, Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In 2016, Gable has capacity to make 2,448,000 wallets and incurs a cost of $8,568,000 for this capacity.

In 2017, Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of $7,803,000.

Required

  1. Calculate the partial-productivity ratios for materials and conversion (capacity costs) for 2017, and compare them to a benchmark for 2016 calculated based on 2017 output.
  2. How can Gable Company use the information from the partial-productivity calculations?

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