Crynton Company makes a household appliance with model number L800. Crynton Company presents the following data for 2017 and 2018.

                                                                            2017                2018

Units of L800 produced and sold                           40                    55

Selling price                                                   $45,000           $42,000

Direct materials (square feet)                          25,000             28,000

Direct material costs per square foot                    $58                  $60

Manufacturing capacity for L800 (units)               70                    70

Total conversion costs                                 $224,000         $252,000

Conversion costs per unit of capacity             $3,200             $3,600

Operating Income Statement

	2017	2018
Revenues ($45,000 ´ 40; $42,000 ´ 55)	$1,800,000	$2,310,000
Costs
Direct material costs    ($58 ´ 25,000; $60 ´ 28,000)	1,450,000	1,680,000
Conversion costs	224,000	252,000
Total costs	1,674,000	1,932,000
Operating income	$   126,000	$378,000
Change in operating income	$252,000 F

 

Required:

1. Calculate the growth, price-recovery, and productivity components that explain the change in operating income.

2. Comment on your answer in requirement one. What do these components indicate?

3. In your opinion what are the factors which may contribute to unfavorable growth and price recovery components?