Meredith Corporation makes a special-purpose machine, D4H, used in the textile industry. Meredith has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data for 2016 and 2017. (Click the icon to view the data.) Click the icon to view additional information.) Suppose that during 2017, the market for Meredith's special-purpose machines grew by 5%. All increases in market share (that is, sales increases greater than 5%) are the result of Meredith's strategic actions. Read the requirement. Data Table Revenue effect of price recovery Cost effect of price recovery Change in operating income due to price recovery The company has chosen a product differentiation strategy. The growth, price-recovery and productivity components of the change in operating income from 2016 to 2017 are as follows: Revenue effect of growth Cost effect of growth Change in operating income due to growth Change in operating income due to productivity Print Done $ $ $ CA $ $ I 900,000 F 253,750 646,250 220,000 126,750 93,250 270,000 U F LT F U F F LT X Data Table 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 / row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer (row 9/row 8) Requirement Print S Done S $ S S $ 2016 - Calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor, product differentiation, and cost leadership. How successful has Meredith been in implementing its strategy? Explain. 200 45,000 $ 290,000 2,175,000 $ 7,500 $ 110 customers 8.75 $ 290 1,100,000 $ 10,000 S X 2017 - 220 46,000 300,000 9.00 290 2,233,000 7,700 100 customers 990,000 9,900 X he market fo at is, sales -market-siz (F) or unfa me Size Calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor. Begin by selecting the formula you will use. Then enter the amounts and calculate the change in operating income due to the industry-market-size factor. Determine whether the amount has a favorable effect on operating income or unfavorable effect (Round your answers to the nearest whole number Label the variance as favorable (F) or unfavorable (U)) S Growth component S x( Growth component Unit increase from market size Before calculating the change in operating income due to product differentiation must calculate the growth in market share due to product differentiation. Begin by selecting the formula you will use. Then enter the amounts and calculate the growth in market share due to product differentiation. Determine whether the amount has a favorable effect on operating income or unfavorable effect. (Round your answers to the nearest whole number. Label the variance as favorable (F) or unfavorable (U).) Unit increase from market share x ( Total unit increase 2 Total unit increase ) = ) = Now calculate the change in operating income due to product differentiation. Label each component as to whether the amount has a favorable effect on operating income or unfavorable effect. (Label each variance as favorable (F) or unfavorable (U)) Y Now calculate the change in operating income due to product differentiation. Label each component as to whether the amount has a favorable effect on operating income or unfavorable effect. (Label each variance as favorable (F) or unfavorable (U).) F $ Growth in market share due to product differentiation Revenue effect of price recovery Cost effect of price recovery Change in operating income due to product differentiation Next determine the change in operating income due to cost leadership Determine whether the amount has a favorable effect on operating income or unfavorable effect (Label the variance as favorable (F) or unfavorable (U)) Change in operating income due to cost leadership Now calculate the change in operating income by entering the appropriate amounts. (Label each variance as favorable (F) or unfavorable (U).) Change in operating income due to industry-market-size Change in operating income due to product differentiation Change in operating income due to cost leadership D F F Change in operating income ) = due to industry-market size )= $ F U F F F F This question is complete. Move your cursor over or tap on the red arrows to see incorrect answers. Change in operating income due to product differentiation F Growth in market share due to product differentiation F $ Next determine the change in operating income due to cost leadership. Determine whether the amount has a favorable effect on operating income or unfavorable effect. (Label the variance as favorable (F) or unfavorable (U).) Change in operating income due to cost leadership Now calculate the change in operating income by entering the appropriate amounts. (Label each variance as favorable (F) or unfavorable (U).) Change in operating income due to industry-market-size $ F Change in operating income due to product differentiation F Change in operating income due to cost leadership Total change in operating income How successful has Merrimack been in implementing its strategy? Explain (Round the percent to the nearest whole percentage.) Merrimack has been successful in implementing its product differentiation strategy. This is shown as of the increase in operating income during 2017 was from the growth in market share due to product differentiation. ie, the distinctiveness of its machines This question is complete. Move your cursor over or tap on the red arrows to see incorrect answers. F F