Strategic Analysis of Operating Income Costa Associates is a construction engineering firm that prepares detailed construction drawings for single$-$family homes. The market for this service is very

competitive. To compete successfully Costa must deliver quality service at low cost.

Costa presents the following data for $2019$ and $2020.$

$\mathrm{ \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; 2}01\mathrm{9\; }2020$

$1.$ Number of jobs billed                                                                                  $450\mathrm{ \; 6}50$

$2.$ Selling price per job                                                                              $ $3,500$    $ $3,300$

$3.$ Engineering labor$-$hours $\mathrm{ \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; 2}7,000\mathrm{ \; \; 3}2,000$

$4.$ Cost per engineering labor$-$hour                                                             $ $39$   $ $40$

$5.$ Engineering support capacity $($number of jobs the firm can do$\mathrm{) \; \; \; }850\mathrm{ \; \; \; \; \; \; 8}50$

$6.$ Total cost of engineering support $($space rent, equipment, etc.$)$ $$263,500$    $$306,000$

$7.$ Engineering support$-$capacity cost per job                                         $ $310$     $ $360$

Engineering labor$-$hour costs are variable costs. Engineering support costs for each year

depend on the engineering support capacity that Costa chooses to maintain each year

$($that is$,$ the number of jobs it can do each year$).$ Engineering support costs do not vary

with the actual number of jobs done in a year.

$1.$ Calculate the operating income of Costa Associates in $2019$ and $2020.$

$2.$ Calculate the growth, price$-$recovery, and productivity components that explain the

change in operating income from $2019$ to $2020.$

$3.$ Comment on your answer in requirement $2.$ What do these components indicate?