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

question 135

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 operating profit in 2018?

• A)$200 000
• B)$1 804 500
• C)$1 440 000
• D)$364 500

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Definitions:

Cost Of Goods Manufactured

The total cost associated with producing goods, including materials, labor, and overhead, that is ready for sale during a specific time period.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including direct labor and materials.

Underapplied Manufacturing Overhead

This occurs when the actual manufacturing overhead costs exceed the overhead allocated to products during a period, indicating insufficient cost allocation.

Overapplied Manufacturing Overhead

This occurs when the actual manufacturing overhead costs are less than the overhead allocated to products during a period.