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Use the information below to answer the following question(s).
Following a strategy of product differentiation,Despotovich Corporation makes a high-end Computer Monitor,CM12.Despotovich Corporation presents the following data for the years 1 and 2:
Despotovich Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM12 in Year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of CM12 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 nor customer-service costs are affected by changes in actual volume.Despotovich Corporation has 46 customers in Year 1 and 50 customers in Year 2 .The industry market size for high-end computer monitors increased 5% from Year 1 to Year 2.Of the $40 increase in unit selling price,$10 was attributable to a general increase in prices.
-Required:
a.What amount is the revenue effect of growth component?
b.What amount is the cost effect of growth component?
c.What is the change in operating income as a result of the growth component?
Velocity
In economics, the rate at which money circulates in the economy, typically measured as the ratio of gross national product to the total supply of money.
Money Supply
The sum total of available financial assets in an economy at a particular time slot.
Price Level
A general measure of the cost of goods and services within an economy or specific market at a given time.
Real GDP
The total value of all goods and services produced within a country in a year, adjusted for inflation, reflecting the real purchasing power.
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