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

question 3

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 price-recovery component?

• A)$179 000 F
• B)$179 000 U
• C)$420 000 F
• D)$241 000 U

---

Definitions:

Social Structures

The complex framework of societal institutions (such as family, education, and economy) and the social practices that make up a society and organize and establish limits on people's behavior.

Diverge

To move or extend in different directions from a common point; to differ in opinion, character, or form.

Phonetic Alphabet

A set of symbols or codes used to represent the sounds of spoken language, facilitating accurate communication, especially in noisy environments or over radio.

Cherokee Language

A Southern Iroquoian language spoken by the Cherokee people, notable for its unique writing system, the Cherokee syllabary, invented by Sequoyah.