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

question 132

Essay

Use the information below to answer the following question(s).
Following a strategy of product differentiation,Instruments Inc.makes a hand held calculator,II400.Instruments Inc.presents the following data for the years 1 and 2:
Instruments Inc.produces no defective units but it wants to reduce direct materials usage per unit of II400 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of II400 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.Instruments Inc.has 23 customers in year 1 and 25 customers in year 2.The industry market size for hand held calculators increased 5% from year 1 to year 2.Of the $4 increase in unit selling price,$1 is due to a general increase in prices.
-Required:
a.What is the net effect on operating income as a result of the productivity component?

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Definitions:

Representative

An individual or group chosen to act or speak on behalf of a larger body.

Reputation

A general belief or opinion about someone or something's character or quality.

Enthymeme

A shortened argument that omits a premise or conclusion, assuming it is obvious.

Hypothetical Syllogism

A form of logical argument where two conditional statements lead to a conclusion, assuming the first one implies the second.