Answer the following questions using the information below:

Following a strategy of product differentiation, Arseniq Company makes a high-end Appliance, XT15. Arseniq presents the following data for the years 2014 and 2015:

Arseniq produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 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. Arseniq had 140 customers in 2014 and 145 customers in 2015.

What is operating income for 2014?

A) $11,200,000

B) $9,000,000

C) $11,440,000

D) $9,207,000

What is the change in operating income from 2014 to 2015?

A) $3,875,000 F

B) $2,200,000 U

C) $2,200,000 F

D) $3,875,000 U

What is the revenue effect of the growth component?

A) $2,625,000 U

B) $1,250,000 U

C) $2,625,000 F

D) $1,250,000 F

What is the cost effect of the growth component?

A) $1,506,250 U

B) $1,506,250 O

C) $375,000 U

D) $375,000 O

What is the net effect on operating income as a result of the growth component?

A) $1,118,750 F

B) $875,000 F

C) $875,000 U

D) $1,118,750 U

What is the cost effect of the price-recovery component?

A) $1,506,250 F

B) $1,506,250 U

C) $375,000 U

D) $375,000 F

What is the net effect on operating income as a result of the productivity component?

A) $206,250 F

B) $206,250 U

C) $875,000 U

D) $875,000 F