Ratliff Appliances Company makes a household appliance with model number RM16. The goal for 2020 is to
Question:
Ratliff Appliances Company makes a household appliance with model number RM16. The goal for 2020 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs
depend on production capacity defined in terms of RM16 units that can be produced. The industry market size for appliances increased 10% from 2019 to 2020. The following additional data are available for 2019 and 2020:
20192020Units Produced & Sold33,00037,950Selling Price$ 360$ 345Direct Materials (square feet)82,50087,000Direct Material Costs per square foot$ 31$ 33Manufacturing capacity (units)41,25039,850Total Conversion Costs$ 866,250$ 797,000Conversion Costs per unit of capacity$ 21$ 20
Ignoring the market growth, but considering your answer to question (a), how much of Ratliff Co's change in income from 2019 to 2020 is due to a cost leadership strategy? (3 points).
Expert Answer:
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