Question
La Flamme Corporation manufactures corrugated cardboard boxes. An analysis of La Flamme's operating income changes between 2021 and 2022 shows the following: Operating income for
La Flamme Corporation manufactures corrugated cardboard boxes. An analysis of La Flamme's operating income changes between 2021 and 2022 shows the following: Operating income for 2021 $1,700,000 Add growth component 80,000 Deduct price-recovery component (60,000) Add productivity component 180,000 Operating income for 2022 $1,900,000 . . . Question content area top right Part 1 The industry market size for corrugated cardboard boxes did not grow in 2022, input prices did not change, and La Flamme reduced the price of its boxes in line with the market. Required 1. Was La Flamme's gain in operating income in 2022 consistent with a cost leadership strategy? 2. Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?
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