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

question 29

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 price-recovery component?

• A)$179,000 favourable
• B)$179,000 unfavourable
• C)$182,000 unfavourable
• D)$20,000 favourable
• E)$20,000 unfavourable

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Definitions:

Used Textbooks

Textbooks that have been previously owned and used by someone else.

Defectives

Items or products that fail to meet quality standards or specifications.

Weight Loss

Weight loss is the reduction of total body mass due to a mean loss of fluid, body fat, or lean mass, often resulting from exercise, diet, or a specific health regimen.

Confidence Interval

A spectrum of numbers coming from sample data that is expected to encompass the value of an unspecified population parameter.