Refer to Problem 12-30. As a result of the actions taken, quality has significantly improved in 2013 while rework and unit costs of the Maxus have decreased. Scott has reduced manufacturing capacity because capacity is no longer needed to support rework. Scott has also lowered the Maxus’s selling price to gain market share and unit sales have increased. Information about the current period (2013) and last period (2012) follows.

Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that Scott can support, not the actual number of customers it serves. Scott has 70 customers in 2012 and 80 customers in 2013.

Required:
1. Calculate operating income of Scott Company for 2012 and 2013.
2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2012 to 2013.
3. Comment on your answer in requirement 2. What do these components indicate?

Data From Exercise 12-30:
Scott Company manufactures a DVD player called the Maxus. The company sells the player to discount stores throughout the country. This player is significantly less expensive than similar products sold by Scott’s competitors, but the Maxus offers just DVD playback, compared with DVD and Blu-ray playback offered by competitor Nomad Manufacturing. Furthermore, the Maxus has experienced production problems that have resulted in significant rework costs. Nomad’s model has an excellent reputation for quality.