188 Chapter 7

Revenue effect of price-rocovery component (Price Factor

2. Price-Recovery component
Output price this year Pxx
Less: Output price last year
Increase (Decrease) in Output price Pxx
Multiply by: Actual units of output sold this year Pxx
Favorable (Unfavorable)
Cost effect of price-recovery component* Pxx
Input prices this year
Less: Input prices last year Pxx
Increase (Decrease)*
Multiply by: Actual units of inputs or capacity
that would have been used to produce this
year's output assuming the same input-output
relationship that existed last year Pxx
(Favorable) Unfavorable*
To be computed for each cost element.
3. Productivity component
Actual units of inputs or capacity Pxx
used to produce this year's output
Less: Actual inputs or capacity that would
have been used to produce this year's
output assuming the same input-output
relationship that existed last year XX
Increase (Decrease) Pxx
Multiply by: Input price last year XX
Favorable (Unfavorable)* PxX
Favorable ifit inçreases operating income. Unfavorable if it decreases operating
income.

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