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

question 125

Multiple Choice

Use the information below to answer the following question(s) .
Following a strategy of product differentiation, Barry Company makes an XX 300. Barry Company presents the following data for the years 1 and 2.
Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 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. Barry Company has 23 customers in year 1 and 25 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the cost effect of price-recovery component?

• A) $61,000 favourable
• B) $60,850 unfavourable
• C) $60,100 favourable
• D) $60,100 unfavourable
• E) $61,000 unfavourable

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Definitions:

Operations

Refers to the daily activities involved in running a business, which can include production, marketing, and product development.

Variable Costs

Costs that change in proportion to the volume of goods or services produced.

Per-unit Basis

A method of calculation or evaluation by considering individual units or items, allowing for analysis or comparison.

Activity Level

In cost accounting, the volume of output or production that impacts the cost of a specific activity.