Draxx Company manufactures an electronic component, ZP98. This component is significantly less expensive than similar products sold by Draxx's competitors. Order-processing time is very short; however, approximately 10% of products are defective and returned by the customer. Returns and refunds are handled promptly. Young Manufacturing, Draxx's main competitor, has a higher-priced product with almost no defects but a longer order-processing time. Assume that in 2022, Draxx has changed its processes and trained workers to recognize quality problems and fix them before products are finished and shipped to customers. Quality is now at an acceptable level. Cost per kilogram of materials is about the same as before, but conversion costs are higher, and Draxx has raised its selling price in line with the market. Sales have increased and returns have decreased. Draxx's managers attribute this to higher quality and a price that is still less than Young's. Information about the current period (2022) and last period (2021) follows. : (Click the icon to view the data.) (Click the icon to view the additional information.) Required - Data Table $ 4. 1a. Units of ZP98 produced and sold 1b. Units of ZP98 returned 1c. Net sales in units 2. Selling price 3. Direct materials (kilograms) used Direct material cost per kilogram 5. Manufacturing capacity in units of ZP98 6. Total conversion costs 7. Conversion cost per unit of capacity 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity cost per customer 11. Advertising staff 12. Total advertising costs 13. Advertising cost per employee 2021 2022 5,100 6,375 700 450 4,400 5,925 44 $ 50 2,600 3,250 $ 10.75 $ 10.75 8,250 8,250 90,750 $ 148,500 $ 11 $ 18 70 customers 70 customers 4,200 $ 4,375 60.00 $ 62.50 2 2 52,000 $ 62,000 $ 26,000 $ 31,000 A A GA $ Print Done More Info wl Conversion costs in each year depend on production capacity defined in terms of ZP98 units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Draxx can support, not the actual number of customers it serves. Draxx has 60 customers in 2021 and 70 customers in 2022. At the start of each year, management uses its discretion to determine the number of advertising staff for the year. Advertising staff and its costs have no direct relationship with the quantity of ZP98 units produced and sold or the number of customers who buy ZP98. Print Done Requirement 1. Calculate the change in operating income of Draxx Company in 2021 and 2022. (Round your answers to the nearest whole dollar.) 2021 Revenues - Less: Sales returns Required Net revenue Costs Direct material costs 1. Calculate the change in operating income of Draxx Company in 2021 and 2022 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2021 to 2022 3. Comment on your answer in requirement 2. What do these components indicate? Conversion costs Selling and customer service costs Advertising costs Total costs Print Done Operating income Draxx Company manufactures an electronic component, ZP98. This component is significantly less expensive than similar products sold by Draxx's competitors. Order-processing time is very short; however, approximately 10% of products are defective and returned by the customer. Returns and refunds are handled promptly. Young Manufacturing, Draxx's main competitor, has a higher-priced product with almost no defects but a longer order-processing time. Assume that in 2022, Draxx has changed its processes and trained workers to recognize quality problems and fix them before products are finished and shipped to customers. Quality is now at an acceptable level. Cost per kilogram of materials is about the same as before, but conversion costs are higher, and Draxx has raised its selling price in line with the market. Sales have increased and returns have decreased. Draxx's managers attribute this to higher quality and a price that is still less than Young's. Information about the current period (2022) and last period (2021) follows. : (Click the icon to view the data.) (Click the icon to view the additional information.) Required - Data Table $ 4. 1a. Units of ZP98 produced and sold 1b. Units of ZP98 returned 1c. Net sales in units 2. Selling price 3. Direct materials (kilograms) used Direct material cost per kilogram 5. Manufacturing capacity in units of ZP98 6. Total conversion costs 7. Conversion cost per unit of capacity 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity cost per customer 11. Advertising staff 12. Total advertising costs 13. Advertising cost per employee 2021 2022 5,100 6,375 700 450 4,400 5,925 44 $ 50 2,600 3,250 $ 10.75 $ 10.75 8,250 8,250 90,750 $ 148,500 $ 11 $ 18 70 customers 70 customers 4,200 $ 4,375 60.00 $ 62.50 2 2 52,000 $ 62,000 $ 26,000 $ 31,000 A A GA $ Print Done More Info wl Conversion costs in each year depend on production capacity defined in terms of ZP98 units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Draxx can support, not the actual number of customers it serves. Draxx has 60 customers in 2021 and 70 customers in 2022. At the start of each year, management uses its discretion to determine the number of advertising staff for the year. Advertising staff and its costs have no direct relationship with the quantity of ZP98 units produced and sold or the number of customers who buy ZP98. Print Done Requirement 1. Calculate the change in operating income of Draxx Company in 2021 and 2022. (Round your answers to the nearest whole dollar.) 2021 Revenues - Less: Sales returns Required Net revenue Costs Direct material costs 1. Calculate the change in operating income of Draxx Company in 2021 and 2022 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2021 to 2022 3. Comment on your answer in requirement 2. What do these components indicate? Conversion costs Selling and customer service costs Advertising costs Total costs Print Done Operating income
