13-35 STRATEGIC ANALYSIS OF OPERATING INCOME (continuation of 13-340) As a result of the actions taken,...

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13-35 STRATEGIC ANALYSIS OF OPERATING INCOME (continuation of 13-340) As a result of the actions taken, quality has significantly improved in 2017 while rework and unit costs of the Orlicon have decreased. Scott has reduced manufacturing capacity because capacity is no longer needed to support rework. Scott has also lowered the Orlicon's selling price to gain market share and unit sales have increased. Information about the current period (2017) and last period (2016) follows. LO2 1. Units of icon produced and sold 2. Selling price 3. Direct materials used (kits) 4. Direct material cost per kit 5. Manufacturing capacity in kits processed 6. Total conversion costs 7. Conversion cost per unit of capacity (6+ row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 2016 2017 16,000 22,000 $95 $80 20,000 22,000 $32 $32 28,000 26,000 $560,000 $520,000 $20 $20 180 customers 180 customers $27,000 $32,400 10. Selling and customer-service capacity cost per customer (row 9+ row 8) $150 $180 13-35 STRATEGIC ANALYSIS OF OPERATING INCOME (continuation of 13-340) As a result of the actions taken, quality has significantly improved in 2017 while rework and unit costs of the Orlicon have decreased. Scott has reduced manufacturing capacity because capacity is no longer needed to support rework. Scott has also lowered the Orlicon's selling price to gain market share and unit sales have increased. Information about the current period (2017) and last period (2016) follows. LO2 1. Units of icon produced and sold 2. Selling price 3. Direct materials used (kits) 4. Direct material cost per kit 5. Manufacturing capacity in kits processed 6. Total conversion costs 7. Conversion cost per unit of capacity (6+ row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 2016 2017 16,000 22,000 $95 $80 20,000 22,000 $32 $32 28,000 26,000 $560,000 $520,000 $20 $20 180 customers 180 customers $27,000 $32,400 10. Selling and customer-service capacity cost per customer (row 9+ row 8) $150 $180