Suppose that during 2020, the market for Methuen's special-purpose machines grew by 3%. All increases in market share (that is, sales increases greater than 3%) are the result of Methuen's strategic actions. Methuen Corporation makes a special-purpose machine, D4H, used in the textile industry. Methuen has designed the D4H machine for 2020 to be distinct from its competitors. It has been generally regarded as a superior machine. Methuen presents the following data for 2019 and 2020. B (Click the icon to view the data.) (Click the icon to view additional information.) Read the requirement. Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size factor. Begin by selecting the formula you will use. Then enter the amounts and calculate the change in operating income due to the industry-market-size factor. Determine whether the amount has a favorable effect on operating income or unfavorable effect. (Round your answers to the nearest whole number. Label the variance as favorable (F) or unfavorable (U).) Change in operating income = due to industry-market size Requirement Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size factor, product differentiation, and cost leadership. How successful has Methuen been in implementing its strategy? Explain. Data table 2019 2020 200 210 $ 45,000 43,000 $ 310,000 317,500 $ 7.25 $ 8.00 275 275 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer $ 2,145,000 $ 2,172,500 $ 7,800 $ 7,900 95 customers 90 customers $ 1,045,000 $ 900,000 $ 11,000 $ 10,000 - Data table The company has chosen a product differentiation strategy. The growth, price- recovery and productivity components of the change in operating income from 2019 to 2020 are as follows: Revenue effect of growth $ 430,000 F Cost effect of growth 112,375 U 317,625 Change in operating income due to growth F $ Revenue effect of price recovery $ F 420,000 176,625 Cost effect of price recovery U $ 243,375 Change in operating income due to price recovery F $ 114,000 Change in operating income due to productivity F
