Question : 41) ________ measures the change in operating income attributable solely to : 1196087

 

41)

________ measures the change in operating income attributable solely to changes in a company’s profit margins between years 1 and 2. 41)

______ A)

The strategy component B)

The growth component C)

The productivity component D)

The cost leadership component E)

The price-recovery component

42)

________ measures the reduction in costs attributable to a reduction in the quantity of inputs used in year 2 relative to the quantity of inputs that would have been used in year 1 to produce the year 2 output. 42)

______ A)

The price-recovery component B)

The productivity component C)

The growth component D)

The cost leadership component E)

The strategy component

Use the information below to answer the following question(s).

 

Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15. Luke Company presents the following data for the years 20×1 and 20×2.

 

20x120x2

Units of AP15 produced and sold20,00021,000

Selling price $200$220

Direct materials (square feet)60,00061,500

Direct materials costs per square foot

$20$22

Manufacturing capacity for AP15 (units)25,00025,000

Total manufacturing conversion costs$1,000,000$1,110,000

Manufacturing conversion costs

(per unit of capacity)$40$44

Selling and customer- service capacity (customers)6058

Total selling and customer-service costs$360,000$362,500

Cost per customer of selling and customer-service capacity$6,000$

6,250

 

Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20×2.

Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Luke Company has 46 customers in 20×1 and 50 customers in 20×2. The industry market size for high-end appliances increased 5% from 20×1 to 20×2.

43)

What is the operating income for 20×1? 43)

______ A)

$364,500 B)

$1,440,000 C)

$1,240,000 D)

$804,500 E)

$1,240,500

44)

What is operating income in 20×2? 44)

______ A)

$1,440,000 B)

$188,000 C)

$200,000 D)

$364,500 E)

$1,804,500

45)

What is the change in operating income from 20x1to 20×2? 45)

______ A)

$200,000 favourable B)

$364,500 favourable C)

$1,804,500 favourable D)

$1,440,000 favourable E)

$200,000 unfavourable

46)

What is the revenue effect of growth component? 46)

______ A)

$1,804,500 favourable B)

$164,500 favourable C)

$364,500 favourable D)

$200,000 favourable E)

$1,440,000 favourable

47)

What is the cost effect of growth component? 47)

______ A)

$200,000 favourable B)

$140,000 favourable C)

$60,000 favourable D)

$140,000 unfavourable E)

$60,000 unfavourable

48)

What is the net increase in operating income as a result of the growth component? 48)

______ A)

$60,000 favourable B)

$200,000 favourable C)

$140,000 favourable D)

$60,000 unfavourable E)

$140,000 unfavourable

49)

What is the revenue effect of price-recovery component? 49)

______ A)

$420,000 unfavourable B)

$179,000 unfavourable C)

$420,000 favourable D)

$241,000 unfavourable E)

$179,000 favourable

50)

What is the cost effect of price-recovery component? 50)

______ A)

$241,000 unfavourable B)

$420,000 unfavourable C)

$179,000 favourable D)

$420,000 favourable E)

$179,000 unfavourable

51)

What is the net increase in operating income as a result of the price-recovery component?