Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018:

20172018

Units of XT15 produced and sold55,00058,500

Selling priceR400R440

Direct materials (square feet)150,000153,300

Direct materials costs per square footR51R55

Manufacturing capacity in units of XT1562,70062,700

Total conversion costsR6,270,000R6,708,900

Conversion costs per unit of capacityR100R107

Selling and customer-service capacity (customers)150150

Total selling and customer-service costsR2,325,000R2,426,250

Selling and customer-service capacity cost per customer R15,500R16,175

Izzy's Limited 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. Izzy's Limited had 135 customers in 2017 and 140 customers in 2018.

 

What is the change in operating income from 2017 to 2018?

Answer rating: 100% (QA)

Lets calculate the change in operating income from 2017 to 2018 2017 Sales revenue 55000 units x R40... View the full answer