Question : 7) When analyzing the change in operating income, the strategy : 1216962

 

7) When analyzing the change in operating income, the strategy component of growth will increase when:

A) capacity is reduced

B) production efficiencies are successfully implemented

C) selling prices are increased

D) more units are sold

 

8) When analyzing the change in operating income, the strategy component of price-recovery will increase when:

A) capacity is reduced

B) production efficiencies are successfully implemented

C) selling prices are increased

D) more units are sold

9) When analyzing the change in operating income, the strategy component of productivity will increase when:

A) capacity is reduced

B) quality is enhanced

C) selling prices are increased

D) more units are produced and sold

 

10) Successful implementation of a cost leadership strategy will result in:

A) large favorable growth and price-recovery components

B) large favorable price-recovery and productivity components

C) large favorable productivity and growth components

D) only a large favorable growth component

 

11) Successful implementation of a product differentiation strategy will result in:

A) a large favorable growth and price-recovery components

B) a large favorable price-recovery and productivity components

C) a large favorable productivity and growth components

D) only a large favorable growth component

 

12) The revenue effect of growth is calculated by multiplying the difference in units sold (current year minus the previous year) by ________.

A) selling price in the current year

B) selling price in the previous year

C) gross profit in the previous year

D) gross profit in the current year

13) The revenue effect of price recovery is calculated by multiplying the difference in selling price (current year minus the previous year) by ________.

A) actual units sold in the current year

B) budgeted units sold in the previous year

C) budgeted units sold in the current year

D) actual units sold in the previous year

 

14) An operating income analysis of Paul Reynolds Incorporated revealed the following:

 

Operating income for 2012$1,500,000

Add growth component75,000

Deduct price-recovery component(45,000)

Add productivity component60,000

Operating income for 2013$1,590,000

 

Reynolds’ operating income gain is consistent with the:

A) product differentiation strategy

B) downsizing strategy

C) reengineering strategy

D) cost leadership strategy

15) An operating income analysis of Deb Nunn Incorporated revealed the following:

 

Operating income for 2012$1,500,000

Add growth component45,000

Add price-recovery component200,000

Deduct productivity component(24,000)

Operating income for 2013$1,721,000

 

Nunn’s operating income gain is consistent with the:

A) product differentiation strategy

B) downsizing strategy

C) reengineering strategy

D) cost leadership strategy

Answer the following questions using the information below:

 

Meale Company makes a household appliance with model number X500. The goal for 2012 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 10% from 2011 to 2012. The following additional data are available for 2011 and 2012:

 

20112012

Units of X500 produced and sold10,00011,000

Selling price$100$95

Direct materials (square feet)30,00029,000

Direct material costs per square foot$10$11

Manufacturing capacity for X500 (units)12,50012,000

Total conversion costs$250,000$240,000

Conversion costs per unit of capacity$20$20

 

16) What is operating income for 2011?

A) $450,000

B) $1,000,000

C) $750,000

D) $700,000