Question

An analysis of RT Sports’ operating- income changes between 2012 and 2013 shows the following:
Operating income for 2012 .......... $ 2,350,000
Add growth component........... 95,000
Deduct price- recovery component ...... (87,000)
Add productivity component.......... 225,000
Operating income for 2013 ......... $ 2,583,000

The industry market size for insulated coolers did not grow in 2013, input prices did not change, and RT Sports reduced the prices of its coolers.

Required
1. Was RT Sports’ gain in operating income in 2013 consistent with the strategy you identified in requirement 1 of Exercise 14- 11?
2. Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?



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  • CreatedJanuary 15, 2015
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