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

question 8

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 revenue effect of growth component?

• A) $440,000 favourable
• B) $400,000 unfavourable
• C) $400,000 favourable
• D) $200,000 favourable
• E) $220,000 favourable

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Definitions:

Nonshared Environment

The unique environmental experiences not shared between family members, contributing to differences in their development.

Temperament

Inborn differences between one person and another in emotions, activity, and self-regulation. It is measured by the person’s typical responses to the environment.

Three-Generation Household

A living arrangement involving three generations of a family living together, often including grandparents, parents, and children.

Independent Income

Income sources that are not dependent on traditional employment, such as investments, rentals, or royalties, providing financial stability without direct labor.