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Marlin Company manufactures a DVD player called Orlicon. The company sells the player to discount stores throughout the country. (Click the icon to view additional information.) Information about the current period (2017) and last period (2016) follows. (Click the icon to view the information for 2017 and 2016.) Suppose that during 2017, the market for DVD players grew 5%. All increases in market share (that is, sales increases greater than 5%) and decreases in the selling price of the Orlicon are the result of Marlin's strategic actions. (Click the icon to view additional information.) (Click the icon to view operating income for 2016 and 2017.) E: (Click the icon to view the components to explain changes in operating income.) Read the requirement. First, calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor, product differentiation, and cost leadership. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Change due to industry market-size Change due to product differentiation Change due to cost leadership Change in operating income Requirement -X Marlin Company man player to discount stor Click the icon to Information about the Click the icon to Calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor, product differentiation, and cost leadership. How does this relate to Marlin's strategy and its success in implementation? Explain. More Info Print Done This player is significantly less expensive than similar products sold by Marlin's competitors, but the Orlicon offers just DVD playback, compared with DVD and Blu-ray playback offered by competitor Walker Manufacturing. Furthermore, the Orlicon has experienced production problems that have resulted in significant rework costs. Walker's model has an excellent reputation for quality. As a result of the actions taken, quality has significantly improved in 2017 while rework and unit costs of the Orlicon have decreased. Marlin has reduced manufacturing capacity because capacity is no longer needed to support rework. Marlin has also lowered the Orlicon's selling selling price to gain market share and unit sales have increased. More Info - X Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that Marlin can support, not the actual number of customers it serves. Marlin has 77 customers in 2016 and 84 customers in 2017. Data Table 2016 2017 8,000 1. Units of Orlicon 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 (row 6 / row 5) 4.000 93 $ 7,000 35 $ 7,000 35 17,000 425,000 $ 25 $ 11,000 275,000 25 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer (row 9 / row 8) $ * A kit is composed of all the major components needed to produce a DVD player. 95 customers 10,450 $ 110 $ 95 customers 14,250 150 Print Done Data Table 2016 2017 Revenues 372,000 $ 648,000 Costs Direct material costs 245.000 245.000 Manufacturing conversion costs 425,000 10.450 275,000 14,250 Selling and customer service costs Total costs 680,450 534,250 $ (308,450) $ 113,750 Operating income Print Done Data Table Marlin has calculated the following growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017: Revenue effect of growth $ F 372,000 245,000 Cost effect of growth 127,000 Change in operating income due to growth Revenue effect of price recovery U 96,000 3.800 Cost effect of price recovery $ 99,800 Change in operating income due to price recovery Direct material costs 245,000 150,000 F F Conversion costs Selling and customer-service costs $ 395,000 Change in operating income due to productivity Print Done Marlin Company manufactures a DVD player called Orlicon. The company sells the player to discount stores throughout the country. (Click the icon to view additional information.) Information about the current period (2017) and last period (2016) follows. (Click the icon to view the information for 2017 and 2016.) Suppose that during 2017, the market for DVD players grew 5%. All increases in market share (that is, sales increases greater than 5%) and decreases in the selling price of the Orlicon are the result of Marlin's strategic actions. (Click the icon to view additional information.) (Click the icon to view operating income for 2016 and 2017.) E: (Click the icon to view the components to explain changes in operating income.) Read the requirement. First, calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor, product differentiation, and cost leadership. (Do not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Change due to industry market-size Change due to product differentiation Change due to cost leadership Change in operating income Requirement -X Marlin Company man player to discount stor Click the icon to Information about the Click the icon to Calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor, product differentiation, and cost leadership. How does this relate to Marlin's strategy and its success in implementation? Explain. More Info Print Done This player is significantly less expensive than similar products sold by Marlin's competitors, but the Orlicon offers just DVD playback, compared with DVD and Blu-ray playback offered by competitor Walker Manufacturing. Furthermore, the Orlicon has experienced production problems that have resulted in significant rework costs. Walker's model has an excellent reputation for quality. As a result of the actions taken, quality has significantly improved in 2017 while rework and unit costs of the Orlicon have decreased. Marlin has reduced manufacturing capacity because capacity is no longer needed to support rework. Marlin has also lowered the Orlicon's selling selling price to gain market share and unit sales have increased. More Info - X Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that Marlin can support, not the actual number of customers it serves. Marlin has 77 customers in 2016 and 84 customers in 2017. Data Table 2016 2017 8,000 1. Units of Orlicon 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 (row 6 / row 5) 4.000 93 $ 7,000 35 $ 7,000 35 17,000 425,000 $ 25 $ 11,000 275,000 25 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer (row 9 / row 8) $ * A kit is composed of all the major components needed to produce a DVD player. 95 customers 10,450 $ 110 $ 95 customers 14,250 150 Print Done Data Table 2016 2017 Revenues 372,000 $ 648,000 Costs Direct material costs 245.000 245.000 Manufacturing conversion costs 425,000 10.450 275,000 14,250 Selling and customer service costs Total costs 680,450 534,250 $ (308,450) $ 113,750 Operating income Print Done Data Table Marlin has calculated the following growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017: Revenue effect of growth $ F 372,000 245,000 Cost effect of growth 127,000 Change in operating income due to growth Revenue effect of price recovery U 96,000 3.800 Cost effect of price recovery $ 99,800 Change in operating income due to price recovery Direct material costs 245,000 150,000 F F Conversion costs Selling and customer-service costs $ 395,000 Change in operating income due to productivity Print Done
