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
17) What is operating income for 2012?
A) $1,045,000
B) $726,000
C) $486,000
D) $476,000
18) Overall, was Meale's strategy successful in 2012?
A) No, because the selling price per unit decreased.
B) Yes, because operating income increased.
C) Yes, because less direct materials were used.
D) No, because more units were produced and sold.
Answer the following questions using the information below:
Merrill Company makes a household appliance with model number X800. 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 X800 units that can be produced. The industry market size for appliances increased 5% from 2011 to 2012. The following additional data are available for 2011 and 2012:
20112012
Units of X800 produced and sold10,00010,500
Selling price$100$95
Direct materials (square feet)30,00029,000
Direct material costs per square foot$10$11
Manufacturing capacity for X800 (units)12,50012,000
Total conversion costs$250,000$240,000
Conversion costs per unit of capacity$20$20
19) What is the revenue effect of the growth component?
A) $2,500 U
B) $52,500 U
C) $47,500 F
D) $50,000 F
20) What is the cost effect of the growth component for direct materials?
A) $15,000 U
B) $10,000 U
C) $10,000 F
D) $16,500 F
21) What is the cost effect of the growth component for conversion costs?
A) $12,500 U
B) Zero
C) $10,000 U
D) $10,000 F
22) Overall, was Merrill's strategy successful in 2012?
A) No, because the selling price per unit decreased.
B) No, because operating income decreased.
C) Yes, because less direct materials were used.
D) No, because more units were produced and sold.
Answer the following questions using the information below:
Wingard Company makes a household appliance with model number X200. 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 X200 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 X200 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 X200 (units)12,50011,000
Total manufacturing conversion costs$250,000$220,000
Manufacturing conversion costs per unit of capacity$20$20
23) What is the revenue effect of the price-recovery component?
A) $5,000 U
B) $55,000 U
C) $50,000 F
D) $102,500 F
24) What is the cost effect of the price-recovery component?
A) $30,500 F
B) $31,500 U
C) $2,500 F
D
