Following a Strategy of Product Differentiation, Izzy's Limited Company Makes

question 41

Multiple Choice

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018:

Izzy's Limited produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Izzy's Limited had 135 customers in 2017 and 140 customers in 2018.
What is operating income for 2017?

• A) $4,974,000
• B) $7,860,000
• C) $7,269,000
• D) $5,203,500

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Definitions:

Revenue Management

The use of analytics and data to predict consumer behavior, optimize product availability and pricing, and maximize revenue growth.

Differential Pricing

Differential pricing is a strategy where a company charges different prices for the same product or service in different markets or segments, based on factors like customer willingness to pay, market demand, or competition.

Supply Chain Surplus

The difference between the value generated by the final product to the end consumer and the costs involved in the supply chain.

Fashion Apparel

Clothing and accessories designed and manufactured according to current trends and styles.