An analysis of Kimmo’s operating- income changes between 2012 and 2013 shows the following:

Operating income for 2012 .........$ 755,000

Add growth component ...........35,000

Add price- recovery component ........170,000

Deduct productivity component .........(45,000)

Operating income for 2013 ..........$ 915,000

The industry market size for skis did not grow in 2013, input prices did not change, and Kimmo was able to increase the price of its skis.

Required

1. Was Kimmo’s gain in operating income in 2013 consistent with the strategy you identified in requirement 1 in Exercise 14- 13?

2. Explain the price recoverycomponent.