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

question 20

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 change in operating income from year 1 to year 2?

• A) $620,000 favourable
• B) $364,500 unfavourable
• C) $364,500 favourable
• D) $200,000 favourable
• E) $200,000 unfavourable

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Definitions:

Germinal Centers

Areas within lymph nodes where mature B cells rapidly divide, differentiate, and mutate their antibody genes during an immune response.

Lymph Nodes

Small, bean-shaped structures that produce and store cells that help fight infection and disease as part of the lymphatic system.

Lymphocytes

A subclass of white blood cells vital to the immune system, involved in producing antibodies and destroying infected or cancerous cells.

Adaptive Immunity

Adaptive Immunity refers to the immune system’s ability to recognize and specifically target foreign invaders, such as viruses and bacteria, through antibodies and specific immune cells.