An analysis of Pineway's operating-income changes between 2016 and 2017 shows the following:

Operating income for 2016..............................................$1, 500,000

Add growth component.......................................................91,000

Deduct price-recovery component..........................................(82,000)

Add productivity component................................................145,000

Operating income for 2017..............................................$1, 654,000

The industry market size for electric motors did not grow in 2017, input prices did not change, and Pineway reduced the prices of its motors.

Required

1. Was Pineway's gain in operating income in 2017 consistent with the strategy you identified in requirement 1 of Exercise 12-19?

2. Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?