Following a Strategy of Product Differentiation, Sting Corporation Makes a High-End

question 77

Essay

Following a strategy of product differentiation, Sting Corporation makes a high-end computer monitor, CM7. Sting Corporation presents the following data for the years 2012 and 2013:
Sting Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM7 in 2012. Manufacturing conversion costs in each year depend on production capacity defined in terms of CM7 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. Ernsting Corporation has 100 customers in 2012 and 115 customers in 2013. The industry market size for high-end computer monitors increased 5% from 2012 to 2013.
Required:
a. What is the revenue effect of the price-recovery component?
b. What is the cost effect of the price-recovery component?
c. What is the net effect on operating income as a result of the price-recovery component?
d. What is the net effect on operating income as a result of the productivity component?

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Definitions:

Standard Deviation

Standard deviation is a measure of the dispersion or variability in a set of data, quantifying how much individual data points deviate from the mean of the dataset.

T-Score

A standardized score that describes how far an individual's score lies from the mean of a distribution, measured in standard deviation units.

Confidence Estimate

A range or single value derived from a sample statistic that covers an unknown population parameter with a certain confidence level.

T-Distribution

Is a type of probability distribution that is symmetric and bell-shaped, used in statistics when the sample size is small and the population standard deviation is unknown.