Question
Richardo & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Richardo wants
Richardo & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Richardo wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Richardo T-shirt. Richardo presents the following data for its first two years of operations, 2016 and 2017.
1 Number of T-shirts purchased 220,480 260,000 2 Number of T-shirts discarded 12,480 15,000 3 Number of T-shirts sold (row 1 - row 2) 208,000 245,000 4 Average selling price $35.00 $36.00 5 Average cost per T-shirt $20.00 $18.00 6 Administrative capacity (number of customers) 5,000 4,750 7 Administrative costs $2,000,000 $1,947,500 8 Administrative cost per customer (row 7 / row 6) $400 $410 Administrative costs depend on the number of customers Richardo has created capacity to support, not on the actual number of customers served. Richardo had 4 comma 600 customers in 2016 and 4 comma 500 customers in 2017.
1. Calculate Richardo's operating income in both 2016 and 2017. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017. 3. Comment on your answers in requirement 2. What does each of these components indicate?
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