Information about Hinze Corporation is as follows:
$$\begin{array} { l r r }
&20 \times 1&20 \times 2\
\text { Output (urits) } & 40,000 & 42,000 \
\text { Selling price per unit } & \$ 25 & \$ 25 \
\text { Input quantites: } & & \
\text { Materials (kg) } & 2,000 & 2,000 \
\text { Labour (hours) } & 1,600 & 1,625 \
\text { Input prices: } & & \
\text { Materials (per kg) } & \$ 5.00 & \$ 5.50 \
\text { Labour (per hour) } & 500 & \$ 7.50
\end{array}$$
-Refer to the figure.By how much did profits change as a result of changes in productivity related to materials?
A)$550.00 decrease
B)$550.00 increase
C)$312.50 decrease
D)$312.50 increase

Question

Information about Hinze Corporation is as follows:
$$\begin{array} { l r r } 
&20 \times 1&20 \times 2\
\text { Output (urits) } & 40,000 & 42,000 \
\text { Selling price per unit } & \$ 25 & \$ 25 \
\text { Input quantites: } & & \
\text { Materials (kg) } & 2,000 & 2,000 \
\text { Labour (hours) } & 1,600 & 1,625 \
\text { Input prices: } & & \
\text { Materials (per kg) } & \$ 5.00 & \$ 5.50 \
\text { Labour (per hour) } & 500 & \$ 7.50
\end{array}$$
-Refer to the figure.By how much did profits change as a result of changes in productivity related to materials?
A)$550.00 decrease
B)$550.00 increase
C)$312.50 decrease
D)$312.50 increase

Quizplus · Accepted Answer

The change in productivity related to materials is the change in output per unit of materials used. In 20X1, Hinze Corporation used 2,000 kg of materials to produce 40,000 units, while in 20X2, it used 2,000 kg of materials to produce 42,000 units. This represents an increase in productivity of 5% (42,000 / 40,000 - 1 = 0.05).The change in profits as a result of this change in productivity is equal to the change in output multiplied by the selling price per unit. In this case, the change in output is 2,000 units (42,000 - 40,000), and the selling price per unit is $25. Therefore, the change in profits is $50,000 (2,000 * $25).

Information About Hinze Corporation Is as Follows -Refer to the Figure