Centennial Corporation produces a variety of products for industrial purposes. Typically, the markets in which they compete are very competitive. Approximately three years ago, the company's research and development group were able to create a product, the CS-100, which was superior to any competitive product. Two years ago, the company priced the CS-100 at prices that were competitive. As the superiority of the product became apparent, Centennial increased the unit selling price in the most recent fiscal year. Exhibit 1 presents relevant data for the past two fiscal years. Exhibit One Revenue and Cost Information 2021 & 2022 Volume of CS-100 produced and sold Unit selling price Direct materials used in production (gallons) Direct material cost per gallon Manufacturing capacity (units of CS-100) Total conversion costs Selling and customer-service capacity Total selling and customer-service costs Number of customers Design staff Total design costs 2021 2022 11,000 11,500 $5,000 $5,500 880,000 900,000 $25 $30 12,000 $5,560,000 450 customers $2,200,000 375 40 $4,150,000 12,000 $5,750,000 400 customers $1,720,500 360 35 $4,200,000 Required: 1. Briefly describe the characteristics of both the value leadership and cost leadership strategies. Which strategy do you believe that Centennial Corporation is following? Explain. (3 marks) 2. Calculate the operating income of Centennial Corporation for 2021 and 2022. As well, show the change in income between the two years on a line by line basis. (3 marks) 3. Calculate the growth, price-recovery and productivity components that explain the changes in operating income from 2021 to 2022. (12 marks) 4. Suppose that during 2022, the market for the CS-100 grew by 5%. All increases in market share are the result of Centennial's strategic actions. Calculate how much of the change in operating income is due to industry market-size factor, value leadership and cost leadership. Was Centennial successful in implementing its strategy? (4 marks) 5. Management had set a goal for 2022 to reduce material use per unit by 3%. Were they successful in achieving this goal? Provide quantitative support. (3 marks)