Suppose that during 2013, the market for DVD players grew 10%. All increases in market share (that is, sales increases greater than 10%) and decreases in the selling price of the Maxus are the result of Scott’s strategic actions.

In Problem 12-31, As a result of the actions taken, quality has significantly improved in 2013 while rework and unit costs of the Maxus have decreased. Scott has reduced manufacturing capacity because capacity is no longer needed to support rework. Scott has also lowered the Maxus’s selling price to gain market share and unit sales have increased. Information about the current period (2013) and last period (2012) follows.

Calculate how much of the change in operating income from 2012 to 2013 is due to the industry-market-size factor, product differentiation, and cost leadership. How does this relate to Scott’s strategy and its success in implementation?Explain.

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2012 2013 8,000 $95 10,000 $32 14,000 1. Units of Maxus produced and sold 2. Selling price 3. Direct materials used (kits 4. Direct material cost per kit 5. Manufacturing capacity in kits processed 6. Total conversion costs 7. Conversion cost per unit of capacity (row6 row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity cost per customow9row 8) 11,000 $80 11,000 $32 13,000 280,000 $260,000 $20 90 customers 90 customers $13,500 $16,200 $180 $20 $150 A kit is composed of all the major components needed to produce a DVD player