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

question 36

Multiple Choice

Use the information below to answer the following question(s) .Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15.Luke Company presents the following data for the years 1 and 2. Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2.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.Neither conversion costs or customer-service costs are affected by changes in actual volume.Luke Company has 46 customers in year 1 and 50 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Luke Company's cost effect of growth component?

• A)$60,000 unfavourable
• B)$30,000 favourable
• C)$60,000 favourable
• D)$200,000 favourable
• E)$30,000 unfavourable

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Definitions:

Inputs

Resources, information, or efforts contributed towards a process or system in order to achieve output.

Outputs

The final products, services, or results generated by a system, process, or activity.

Total Quality Management

A management approach to long-term success through customer satisfaction, emphasizing continuous improvement of processes in products and services.

Employee-Driven

Employee-Driven implies initiatives, decisions, or actions that are initiated or influenced by the employees themselves, promoting greater involvement and accountability in the organization.