Analysis of growth, price-recovery, and productivity components (continuation of 13-16). An analysis of La Quinta’s operating income changes between 2006 and 2007 shows the following:

The industry market size for corrugated boxes did not grow in 2007, input prices did not change, and La Quinta reduced the price ofits boxes in line with the market.

Operating income for 2006 $1,920,000 Add growth component 72,000 Deduct price-recovery component (60,000)

Add productivity component 216,000 Operating income for 2007 $2,148,000 Required 1. Was La Quinta’s gain in operating income in 2007 consistent with the strategy you identi¬

fied in requirement 1 ofExercise 13-16?

2. Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?