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Following a strategy of product differentiation, Sting Corporation makes a high-end computer monitor, CM7. Sting Corporation presents the following data for the years 2020 and
Following a strategy of product differentiation, Sting Corporation makes a high-end computer monitor, CM7. Sting Corporation presents the following data for the years 2020 and 2021: 2020 2021 Units of CM 7 produced and sold Selling price Direct materials (pounds) 5,000 5,500 $400 $440 15,000 15,375 Direct materials costs per pound $40 $44 Manufacturing capacity for CM7 (units) 10,000 Conversion costs per unit of capacity $100 10,000 $110 Selling and customer-service capacity (customers) Selling and customer-service cost/customer 60 58 $6,000 $6,250 Required: (1 Mark Each) a. What is operating income for 2020? b. What is operating income in 2021? c. What is the change in operating income from 2020 to 2021? d. What is the revenue effect of the growth component? e. What is the cost effect of the growth component? f. What is the net effect on operating income as a result of the growth component? g. What is the revenue effect of the price-recovery component? h. What is the cost effect of the price-recovery component? i. What is the net effect on operating income as a result of the price-recovery component? j. What is the net effect on operating income as a result of the productivity component? k. Show your reconciliation of the operating incomes between the two year
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