Following a strategy of product differentiation, Arseniq Company makes a high-end Appliance, XT15. Arseniq presents the following data for the years 2020 and 2021:

2020 2021

Units of XT15 produced and sold. 50,000 52,500

Selling price $500 $550

Direct materials (square feet) 150,000 153,750

Direct materials costs per square foot $50 $55

Manufacturing capacity in units of XT15 62,500 62,500

Total conversion costs $6,250,000 $6,875,000

Conversion costs per unit of capacity $100 $110

Selling and customer-service capacity (customers) 150 150

Total selling and customer-service costs $2,250,000 $2,343,750

Selling and customer-service capacity cost per customer $15,000 $15,625

Arseniq produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Arseniq had 140 customers in 2020 and 145 customers in 2021.

Required:

1. What is the revenue effect of the price-recovery component?

2. What is the cost effect of the price-recovery component?