Zychol Chemicals Case Study

Unformatted text preview: Case Study: Zychol Chemicals Corporation Jamella C. Montgomery MBA 660, Operations Management January 24, 2015 Jamella C. Montgomery Operations Management Case Study: Zychol Chemicals Corporation January 24, 2015 Productivity costs data analysis: 2006 2007 Adjusted Cost* Adjusted Total Cost Production (units) 4,500 6,000 Raw Materials used (barrels of petroleum by-products) 700 900 Raw Materials per barrel $320 $360 $345.60 $311,040 Labor hours 22,000 28,000 Labor cost per hour $13.00 $14.00 $13.44 $367,320 Capital cost applied to the department ($) $375,000 $600,000 $595,200 $595,200 Producer Price Index 120 125 Total Cost $885,000 $1,336,000 $1,282,560 PPI change = 4.16% (125/120 = 1.04167) {rounded to 2 decimals} *Calculations for Adjusted Cost & Adjusted Total Cost: 360 ÷ 1.04167 28,000 * 13.44 600,000 ÷ 1.04167 900 * 345.60 14 ÷ 1.04167 The productivity analysis highlights the difficulty in accounting for costs. With decisions and The productivity analysis highlights the difficulty in accounting for costs....
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Case Study using POM

Instructions:
Hand in its solution in which you show clearly HOW you got you answers.
Hand in also whatever solution POM for Windows can give you.
Right a short paragraph to answer the two questions asked using your analysis, and make sure you express the changes in productivity for 2007 as a percentage too.

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 she gave him this morning, showed the following:

Production (units) 2006: 4,500 2007: 6,000
Raw material used (barrels of
petroleum by-products) 2006: 700 2007: 900
Labor hours 2006: 22,000 2007: 28,000
Capital cost applied to the
department ($) 2006: $375,000 2007: $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.

1) Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis of productivity inputs for all factors, as well as a multifactor analysis for both years with the change in productivity (up or down) and the amount noted.

2) Management's expectation for departments such as Mr. Richard's is an annual productivity increase of 5%. Did he reach his goal?

Solution Preview

Running Head: PRODUCTIVITY GROWTH

Productivity Growth and Multifactor Analysis

Introduction
The increase in the production units describes an increase in the productivity of Zychol Chemicals. But at the same time total cost of the business is also increasing. The total increase in the production units is 1500 units which is 33.33% more than the previous year on the other hand total increase in the cost of the business is more than 50% in comparison of the previous year.
Productivity Report
Material Productivity:
The result shows an increase in the productivity of Zychol Chemicals as its total units production is increasing by 33.33% in the year 2007 from the year 2006. The cost of Raw material has increased by 12.50%, which is affecting the productivity of the business. The 12.50% increase in per barrel cost is causing an increase in the total cost of direct material by 44.64%. Total increase in the cost of raw material is because of the presence of global competition and the ...

Solution Summary

Case study using POM is examined. The productive managers of Zychol Chemicals is examined.

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