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

question 135

Essay

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 is the operating income for Year 1?
b.What is the operating income in Year 2?
c.What is the change in operating income from Year 1 to Year 2?

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Definitions:

Risk Profile

A summary outlining the types of threats an organization, asset, project, or individual faces, evaluated in terms of likelihood and impact.

Firm Value

The total worth of a company, determined by its assets, earnings, and market perception, influencing shareholder wealth.

Price of Corn

The monetary value at which corn can be bought or sold in the market.

Financial Risk Management

The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk.