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3) Following a strategy of product differentiation, Entity Corporation makes a high-end Computer Monitor, CM12. Entity presents the following data for the years 2018

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3) Following a strategy of product differentiation, Entity Corporation makes a high-end Computer Monitor, CM12. Entity presents the following data for the years 2018 and 2019: Units of CM12 produced and sold Selling price Direct materials (pounds) Direct materials costs per pound 10 n Manufacturing capacity for CM12 (units) Total manufacturing conversion costs Conversion costs per unit of capacity - Selling and customer service capacity (customers) 2018 2019 5,000 5,500 $400 $440 15,000 15,375 $40 $44 10,000 10,000 $1,000,000 $1,110,000 $100 $111 60 58 $360,000 $362,500 $6,000 $6,250 Total selling and customer service costs Cost per customer of selling and customer-service capacity Entity produces no defective units but it wants to reduce direct materials usage per unit of CM12 in 2019. Manufacturing conversion costs in each year depend on production capacity defined in terms of CM12 units that can be produced. Selling and customer- service costs depend on the number of customers that the customer and service functions are designed to support. Entity has 46 customers in 2018 and 50 customers in 2019. Based on this information, perform the following: mers in 2019. Determine the change in operating income by preparing an income statement for each of the two years. A) B) C) D) Determine the revenue and cost effects of growth component. Determine the revenue and cost effects of price-recovery component. Determine the cost effects of the productivity component. J

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