Answer the Following Questions Using the Information Below:
Following a Strategy

question 27

Multiple Choice

Answer the following questions using the information below:
Following a strategy of product differentiation,Platypus Company makes a high-end appliance,AP15.Platypus Company presents the following data for the years 2017 and 2018:
$$\begin{array} { l r r } & 2017 & 2018 \\\text { Units of AP15 produced and sold } & 20000 & 21000 \\\text { Selling price } & \$ 200 & \$ 220 \\\text { Direct materials (square metres) } & 60000 & 61500 \\\text { Direct materials costs per square metre } & \$ 20 & \$ 22 \\\text { Manufacturing capacity in urits of AP15 } & 25000 & 25000 \\\text { Total conversion costs } & \$ 1000000 & \$ 1110000 \\\text { Conversion costs per unit of capacity } & \$ 40 & \$ 44 \\\text { Selling and customer-service capacity (customers) } & 60 & 58 \\\text { Total selling and customer-service costs } & \$ 360000 & \$ 362500 \\\text { Selling and customer-service capacity cost per customer } & \$ 6000 & \$ 6250\end{array}$$ Platypus Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 2019.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.Platypus Company has 46 customers in 2017 and 50 customers in 2018.The industry market size for high-end appliances increased 5% from 2017 to 2018.
-What is the net effect on operating profit as a result of the growth component?

• A)$60 000 F
• B)$140 000 F
• C)$60 000 U
• D)$200 000 F

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Definitions:

Asmat People

An ethnic group living in Papua, Indonesia, known for their intricate wood carvings, elaborate ceremonies, and traditional way of life closely tied to nature.

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A deity associated with warfare, worshipped in various religions and mythologies, known for embodying strength, victory, and protection in battles.

Kuka'ilimoku

A Hawaiian war god, represented in wood sculptures and invoked by warriors and chiefs for success in battle and governance.

Kamehameha

A Hawaiian king who united the Hawaiian Islands into a single kingdom in the early 19th century.