Merrimack Corporation makes a special-purpose machine, D4H, used in the textile
ID: 2430461 • Letter: M
Question
Merrimack Corporation makes a special-purpose machine, D4H, used in the textile industry. Suppose that during 2017, the market for Merrimack's special-purpose machines grew by 3% Merrimack has designed the D4H machine for 2017 to be distinct from its competitors. It has All increases in market share (that is, sales increases greater than 3%) are the result of been generally regarded as a superior machine. Merrimack presents the following data for 2016 and 2017. Merrimack's strategic actions. Read the requirement ?(Click the icon to view the data.) ?(Click the icon to view additional information.) (Round intermediary calculations and your final answer to the nearest whole number. Label the variance as favorable (F) or unfavorable (U).) The change in operating income from 2016 to 2017 due to the industry-market-size factor is S The change in operating income from 2016 to 2017 due to product differentiation is $ The change in operating income due to cost leadership is $ The total change in operating income from 2016 to 2017 is $ How successful has Merrimack been in implementing its strategy? Explain. (Round the percent to the nearest whole percentage.) Merrimack of the increase in operating income during 2017 was from the growth in market share due to product differentiation, i.e., the distinctiveness of its machines. successful in implementing its product differentiation strategy. This is shown as %Explanation / Answer
Of the 15 units increase in sales from 260 to 275 units 3% or 8 (260 x 3%) units is due to growth in size and 7 units (15-8) is due increase in market share. a) Change in operating Income due to industry market size = $446,035 x 8/15 $237,885.33 F b) Change in operating income due to price recovery $65,702.00 F Growth in market share due to product Differentiation = $446,035 x 7/15 $208,149.67 F Change in operating income due to product differentiation $273,851.67 F c) Change in operating income due to cost leadership $166,013.00 F d) Total change in operating income = a + b + c $677,750.00 F Merrimack Has been Successful % increase = $273,851.67/$677,750 40.41%