Information

Question

a. How do you determine that this is a favourable outcome?

b. How do you determine this is an unfavourable outcome?

2015 2016 1. Units of LCX1 produced and sold 1,000,000 1,150,000 2. Selling price $27 $25 3. Direct materials (square centimetres of silicon wafers) 3,000,000 2,900,000 4. Direct material cost per square centimetre $1.40 $1.50 3,750,000 3,500,000 5. Manufacturing processing capacity (in square centimetres of silicon wafer) $16,050,000 $15,225,000 6. Conversion costs (all manufacturing costs other than direct material costs) 7. Conversion cost per unit of capacity (Row 6:Row 5) $4.28 $4.35 8. R&D employees 40 39 9. R&D costs $4,000,000 $3,900,000 10. R&D cost per employee (Row 9=Row 8) $100,000 $100,000 2015 2016 $27,000,000 $28,750,000 Revenue ($27 per unit x 1,000,000 units; $25 per unit x 1,150,000 units) Costs Direct material costs ($1.40/sq. cm. x 3,000,000 sq. cm.; $1.50/sq. cm. X 2,900,000 sq. cm.) Conversion costs ($4.28/sq. cm. x 3,750,000 sq. cm.; $4.35/sq. cm. x 3,500,000 sq. cm.) R&D costs ($100,000 x 40 employees; $100,000 X 39 employees) 4,200,000 4,350,000 16,050,000 4,000,000 15,225,000 3,900,000 Total costs 24,250,000 23,475,000 Operating income Change in operating income $ 2,750,000 $ 5,275,000 $2,525,000 F A Revenue Effect of Growth Actual units of output sold output sold Actual units of Revenue effect of growth in 2016 = (1,150,000 units $4,050,000 F Selling x price in 2015 in 2015 1,000,000 units)