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Buck Corporation offers a computer monitor, CM7 to its customers. Buck adopted product differentiation strategy from 2019. Buck Corporation presents the following data for 2018

Buck Corporation offers a computer monitor, CM7 to its customers. Buck adopted product differentiation strategy from 2019. Buck Corporation presents the following data for 2018 and 2019:

2018

2019

Units of CM7 produced and sold Average Selling price per unit

5,000

$400

5,400

$420

Direct materials used (pounds) Direct materials costs per pound

15,000

$40

17,375

$44

Customer service capacity (customers) Customer service costs per year Customer service costs per customer

120

$360,000

$3,000

125

$362,500

$2,900

Direct materials are directly related to production quantity. Customer service costs depend on the number of customers that the company can support, not the actual number of customers it serves. Buck Corporation has 100 customers in 2018 and 115 customers in 2019.

Suppose that during 2019, the market for Buck Corporations product grew by 6%. Any further changes in selling price and sales quantity are strategic choices by Bucks management to implement their strategy.

Q:

Calculate the growth, price-recovery and productivity components that explain the change in operating profit from 2018 to 2019.

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