Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018:

20172018

Units of XT15 produced and sold55,00058,500

Selling priceR400R440

Direct materials (square feet)150,000153,300

Direct materials costs per square footR51R55

Manufacturing capacity in units of XT1562,70062,700

Total conversion costsR6,270,000R6,708,900

Conversion costs per unit of capacityR100R107

Selling and customer-service capacity (customers)150150

Total selling and customer-service costsR2,325,000R2,426,250

Selling and customer-service capacity cost per customer R15,500R16,175

Izzy's Limited 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. Izzy's Limited had 135 customers in 2017 and 140 customers in 2018.

 

What is the change in operating income from 2017 to 2018?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Understanding the Problem We need to calculate the change in operating income from 2017 to 2018 for Izzys LimitedTo do thiswell calculate the operating income for each year and then find the differenc... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

11th Edition

9780538480901, 9781111525774, 538480890, 538480904, 1111525773, 978-0538480895

More Books

Students also viewed these Accounting questions