Following a strategy of product differentiation, Caribbean Corporation makes a high-end computer monitor, PRODUCT A. Caribbean...
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Following a strategy of product differentiation, Caribbean Corporation makes a high-end computer monitor, PRODUCT A. Caribbean Corporation presents the following data for the years 2019 and 2020: Units of PRODUCT A produced and sold Selling price Direct materials (pounds) 2019 5,000 P400 15,000 P40 10,000 P1,000,000 Direct materials costs per pound Manufacturing capacity for PRODUCT A (units) Conversion costs Conversion costs per unit of capacity Selling and customer-service capacity (customers) Total selling and customer-service costs P360,000 Selling and customer-service capacity cost per customer P6,000 P100 60 2020 5,500 P440 15,375 P44 10,000 P1,100,000 P110 58 P362,500 P6,250 Caribbean Corporation produces no defective units but it wants to reduce direct materials usage per unit of PRODUCT A in 2020. Manufacturing conversion costs in each year depend on production capacity defined in terms of PRODUCT A 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. Caribbean Corporation has 100 customers in 2019 and 115 customers in 2020. The industry market size for high-end computer monitors increased 5% from 2019 to 2020. Required: a. Calculate operating income of Caribbean Corporation for 2019 and 2020 b. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019-2020. c. Calculate d. What is the revenue effect of the growth component? e. What is the cost effect of the growth component? f. What is the net effect on operating income as a result of the growth component? g. Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size, factor, product differentiation and cost leadership? Following a strategy of product differentiation, Caribbean Corporation makes a high-end computer monitor, PRODUCT A. Caribbean Corporation presents the following data for the years 2019 and 2020: Units of PRODUCT A produced and sold Selling price Direct materials (pounds) 2019 5,000 P400 15,000 P40 10,000 P1,000,000 Direct materials costs per pound Manufacturing capacity for PRODUCT A (units) Conversion costs Conversion costs per unit of capacity Selling and customer-service capacity (customers) Total selling and customer-service costs P360,000 Selling and customer-service capacity cost per customer P6,000 P100 60 2020 5,500 P440 15,375 P44 10,000 P1,100,000 P110 58 P362,500 P6,250 Caribbean Corporation produces no defective units but it wants to reduce direct materials usage per unit of PRODUCT A in 2020. Manufacturing conversion costs in each year depend on production capacity defined in terms of PRODUCT A 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. Caribbean Corporation has 100 customers in 2019 and 115 customers in 2020. The industry market size for high-end computer monitors increased 5% from 2019 to 2020. Required: a. Calculate operating income of Caribbean Corporation for 2019 and 2020 b. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019-2020. c. Calculate d. What is the revenue effect of the growth component? e. What is the cost effect of the growth component? f. What is the net effect on operating income as a result of the growth component? g. Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size, factor, product differentiation and cost leadership?
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What is the revenue effect of the growth component Answer REVENUE EFFECT 2017 2018 CHANGE No of unit... View the full answer
Related Book For
Accounting Principles
ISBN: 978-1119411482
13th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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