Diamante Company gathered the following data for the past two years:

Required:
1. Prepare a productivity profile for each year.
2. Prepare income statements for each year. Calculate the total change in income.
3. Calculate the change in profits attributable to productivity changes.
4. Calculate the price recovery component. Explain its meaning.

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Base Year Current Year Output 600,000 720,000 Output prices $15 $15 Input quantities: Materials (lbs.) 800,000 720,000 Labor (hrs.) 200,000 360,000 Input prices: Materials Labor $5 $6 $8 $8