2.Calculate the growth (both revenue and cost effect), price-recovery (both revenue and cost effect), and productivity components that explain the change in operating income from Year 1 to Year 2. (10 marks)

Account Amount Amount

Operating income in Year 1 493000

Add: Revenue effect of growth component 200,000

Revenue effect of price recovery 330,000

Less: - Cost Effect of Growth Component 90,000

Less: - Cost effect of price recovery component 82,500

Operating Income in Year 2 650,500

3.What type of strategy is the company pursuing: cost leadership or value leadership? Support your answer using the variances calculated in #2 (i.e., explain how the variances may demonstrate that the company is pursuing a particular strategy).