Can someone please help me fill this out? Following a strategy of product differ
ID: 2414704 • Letter: C
Question
Can someone please help me fill this out?
Following a strategy of product differentiation, Arseniq Company makes a high-end Appliance, XT15. Arseniq presents the following data for the years 2016 and 2017:
2016 2017
Units of XT15 produced and sold 50,000 52,500
Selling price $500 $550
Direct materials (square feet) 150,000 153,750
Direct materials costs per square foot $50 $55
Manufacturing capacity in units of XT15 62,500 62,500
Total conversion costs $6,250,000 $6,875,000
Conversion costs per unit of capacity $100 $110
Selling and customer-service capacity (customers) 150 150
Total selling and customer-service costs $2,250,000 $2,343,750
Selling and customer-service capacity cost per customer $15,000 $15,625
Arseniq produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Arseniq had 140 customers in 2016 and 145 customers in 2017.
Income
Statement
Amounts
in 2016
Revenue and
Cost Effects
of Growth
Component
in 2017
Revenue and
Cost Effects of
Price-Recovery
Component
in 2017
Cost Effect of
Productivity
Component
in 2017
Income
Statement
Amounts
in 2017
Revenues ($)
Direct Materials (Variable)
Conversion costs (Fixed)
Selling and customer service costs (Fixed)
Operating income
Income
Statement
Amounts
in 2016
Revenue and
Cost Effects
of Growth
Component
in 2017
Revenue and
Cost Effects of
Price-Recovery
Component
in 2017
Cost Effect of
Productivity
Component
in 2017
Income
Statement
Amounts
in 2017
Revenues ($)
Direct Materials (Variable)
Conversion costs (Fixed)
Selling and customer service costs (Fixed)
Operating income
Explanation / Answer
Combine Income Statement for 2016 and 2017 Particular Working 2016 Working 2017 Revenue 50000*500 $25,000,000 52500*550 $28,875,000 Direct Material 150000*50 $7,500,000 153750*55 $8,456,250 Conversion Cost 50000*100 $5,000,000 52500*100 $5,250,000 Selling & Customer Service cost 15000*140 $2,100,000 15000*145 $2,175,000 Operating Income $10,400,000 $12,993,750 Particular 2016 2017 Revenue Direct Material 30% 29% Conversion Cost 20% 18% Selling & Customer Service Cost 8% 8% Year on Year revenue is Grown up by 16% hike in revenue is due to two reason a. Increase in sale in No. of Unit i.e. incremental sale of 2500 unti @550per Unit b. Increase in 10% in Sale Price per Unit i.e. from $500 to $550