The XTown manufactures an entry-level hoverboard, HOV-X. Pursuing a cost-leadership strategy, the company has tried to improve quality and reduce costs. As a result of the actions taken over the last year, quality has significantly improved in 2020 while rework and unit costs of the HOV-X have decreased. XTown has reduced manufacturing capacity because capacity is no longer needed to support rework. XTown has also lowered HOV-X's selling price to gain market share and unit sales have increased. Requirement 1. Calculate operating income of XTown for 2019 and 2020. (Use parentheses or a minus sign for a loss.) The operating income of XTown for 2019 is The operating income of XTown for 2020 is Requirement 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell. Complete all input cells.) The revenue effect of growth is The cost effect of growth for direct material costs is The cost effect of growth for fixed costs is Calculate the net change in operating income due to the growth component. Be sure to label the net change as to whether the amount has a favorable (F) effect on operating income or unfavorable (U) effect. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell. Complete all input cells.) The change in operating income due to growth is The revenue effect of price-recovery is Information about the current period (2020) and last period (2019) follows: (Click the icon to view the information.) (Click the icon to view additional information.) Read the requirements. The cost effect of price-recovery for direct material costs is The cost effect of price-recovery for conversion costs is The cost effect of price-recovery for selling and customer-service costs is The cost effect of price-recovery for direct material costs is The cost effect of price-recovery for conversion costs is The cost effect of price-recovery for selling and customer-service costs is Calculate the net change in operating income due to the price recovery component. Be sure to label the net change as to whether the amount has a favorable (F) effect on operating income or unfavorable (U) effect. The change in operating income due to price-recovery is Calculate the productivity component of the change in operating income. Begin with the cost effect of productivity for direct material costs. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell. Complete all input cells.) The cost effect of productivity for direct material costs is The cost effect of productivity for conversion costs is The cost effect of productivity for selling and customer-service costs is Calculate the net change in operating income due to the productivity component. Be sure to label the amount as to whether the amount has a favorable (F) effect on operating income or unfavorable (U) effect. The change in operating income due to productivity is Requirement 3. Comment on your answer in requirement 2. What do these components indicate? The analysis of operating income indicates that a significant amount of the while growing sales. XTown Company in operating income resulted from XTown's strategy. The company was able to continue to 1. Units of HOV-X produced and sold 2. Selling price 3. Direct materials used (kits) 4. Direct material cost per kita 5. Manufacturing capacity in kits processed 6. Total conversion costs $ 2019 4,000 98 $ 12,000 31 $ 17,000 425,000 $ 25 $ 2020 9,000 81 7,000 31 12,000 300,000 $ 7. Conversion cost per unit of capacity (row 6 + row 5) $ 8. Selling and customer-service capacity 95 customers 95 customers 9. Total selling and customer-service costs $ 15,200 $ 20,900 10. Selling and customer-service capacity per customer (row 9 + row 8) $ 160 $ 220 a A kit is composed of all the major components needed to produce a hoverboard. 25 Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that XTown can support, not the actual number of customers it serves. XTown has 77 customers in 2019 and 82 customers in 2020.