Problem 3 (23 points): Gamecock Corporation makes a special-purpose machine, Cocky5, used in the textile industry. Gamecock has designed the Cocky5 machine for 2022 to be distinct from its competitors. It has been generally regarded as a superior machine (especially compared to the Tiger4). Gamecock presents the following data for 2021 and 2022: Units of Cocky5 produced and sold Selling price Direct materials (kilograms) Direct material cost per kilogram Cocky5 Manufacturing capacity in units of Conversion costs per unit of capacity Total conversion costs Selling and customer-service capacity (customers) Total selling and customer-service costs Selling & customer-service capacity cost per customer Design staff Total design costs 2022 $2,000,000 $2,025,000 2021 200 210 $40,000 $42,000 300,000 310,000 $8.00 $8.50 250 250 $8,000 $8,100 100 $1,000,000 100 $990,000 $10,000 12 $9,900 12 $1,200,000 $1,212,000 $100,000 Design cost per employee $101,000 Gamecock produces no defective machines, but it wants to reduce DM usage per Cocky5 machine in 2022. Conversion costs in each year depend on production capacity defined in terms of Cocky5 units that can be produced, not the actual units produced. Selling & customer-service costs depend on the number of customers that Gamecock can support, not the actual number of customers it serves. Gamecock has 75 customers in 2021 and 80 customers in 2022. At the start of each year, management uses its discretion to determine the number of design staff for the year. The design staff and its costs have no direct relation with the quantity of Cocky5 produced or the number of customers to whom Cocky5 is sold. Required (please use the blank page at the end of the exam for your work as needed): 1. Calculate the operating income of Gamecock Corporation in 2021 and 2022. (2 pts) 2. What is the revenue effect of the growth component? (2 pts) 3. What is the cost effect of the growth component? (5 pts)) 4. What is the revenue effect of the price-recovery component? (2 pts) 5. What is the cost effect of the price-recovery component? (5 pts) 6. What is the net effect on operating income as a result of the productivity component? (5 pts) 7. What strategy is Gamecock pursuing? How do you know (reference your answers) (2 pts)?