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Please explain step by step which option is correct. Thank you! Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15.
Please explain step by step which option is correct. Thank you!
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: Units of XT15 produced and sold Selling price Direct materials (square feet) Direct materials costs per square foot Manufacturing capacity in units of XT15 Total conversion costs Conversion costs per unit of capacity Selling and customer-service capacity (customers) Total selling and customer-service costs 2017 54,000 $500 150,000 $59 63,300 $6,836,400 $108 150 $2,265,000 2018 57,500 $530 153,750 $64 63,300 $7,216,200 $114 150 $2,366,250 Direct materials costs per square foot Manufacturing capacity in units of XT15 Total conversion costs Conversion costs per unit of capacity Selling and customer-service capacity (customers) Total selling and customer service costs Selling and customer service capacity cost per customer $59 63,300 $6,836,400 $108 150 $2,265,000 $15,100 $64 63,300 $7,216,200 $114 150 $2,366,250 $15,775 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 operating income in 2018? What is operating income in 2018? O A. $3,107,500 OB. $6,390,000 OC. $11,052,550 OD. $11,210,300Step by Step Solution
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