1. Atlantic wants to reduce direct materials usage per Industrial Boiler in 2021. Manufacturing conversion costs in each year depend on production capacity defined in terms of Industrial Boiler units that can be produced, not the actual units of Industrial Boiler produced. Selling and customer-service costs depend on the number of customers that Atlantic can support, not the actual number of customers Atlantic serves. Atlantic has 90 customers in 2020 and 100 customers in 2021. At the start of each year, management uses its discretion to determine the number of design staff for the year. The design staff and costs have no direct relationship with the quantity of Industrial Boiler produced or the number of customers to whom Industrial Boiler is sold.

	2020	2021
Units of Industrial Boiler produced and sold	250	265
Selling price per unit	$42,000	44,000
Direct materials(kilograms)	280,000	287,500
Direct material cost per kilogram	$8.75	$9.75
Manufacturing capacity (units)	275	275
Total conversion costs	$2,145,000	$2,172,500
Conversion cost per unit of capacity	$7,800	$7,900
Selling and customer-service capacity	125 customers	120 customers
Total selling and customer service costs	$1,250,000	$1,188,000
Selling and customer- service capacity cost per customer	$10,000	$9,900
Design staff	15	15
Total design costs	$1,248,000	1,254,000
Design cost per employee	83,200	83,600

Required:

1. Calculate the change in operating income of Atlantic Corporation in 2020 and 2021
2. Calculate the growth, price-recovery, and productivity components of the changes in operating income between 2020 and 2021
3. Comment on your answer in 2. What do these components indicate?