Question
Foley Products Company makes a household appliance with model number X500. The goal for 2018 is to reduce direct materials usage per unit. No defective
Foley Products Company makes a household appliance with model number X500. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased
1010%
from 2017 to 2018. The following additional data are available for 2017 and 2018:
| 2017 | 2018 | |
| Units of X500 produced and sold | 20 comma 00020,000 | 22 comma 00022,000 |
| Selling price | $ 115$115 | $ 108$108 |
| Direct materials (square feet) | 30 comma 00030,000 | 28 comma 80028,800 |
| Direct materials costs per square foot | $ 12$12 | $ 14$14 |
| Manufacturing capacity for X500 (units) | 12 comma 10012,100 | 11 comma 60011,600 |
| Total conversion costs | $ 314 comma 600$314,600 | $ 301 comma 600$301,600 |
| Conversion costs per unit of capacity | $ 26$26 | $ 26$26 |
What is operating income for 2018?
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