Use the Information Below to Answer the Following Question(s)

question 22

Multiple Choice

Use the information below to answer the following question(s) .Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 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.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Luke Company's net increase in operating income as a result of the growth component?

• A)$340,000 unfavourable
• B)$140,000 favourable
• C)$160,000 favourable
• D)$190,000 favourable
• E)$250,000 unfavourable

Apply the principles of incremental cash flow analysis in evaluating projects.

Grasp the significance of equivalent annual cost in project and asset evaluation.

Appreciate the role of pro forma statements in forecasting and planning for future financial performance.

Understand the basic structure and function of neurons.

---

Definitions:

Personal Values

Are core beliefs or ideals that guide an individual's behavior, decision-making, and lifestyle choices.

Environment

The environment or circumstances in which a person, animal, or plant exists or functions.

Identical Twins

Twins who develop from a single fertilized egg that splits in two, creating two genetically identical organisms.

Fraternal Twins

Twins who develop from separate fertilized eggs. They are genetically no closer than brothers and sisters, but they share a fetal environment.