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

question 67

Multiple Choice

Use the information below to answer the following question(s) .Following a strategy of product differentiation, Barry Company makes an XX 300.Barry Company presents the following data for the years 1 and 2. Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2.Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 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.Barry Company has 23 customers in year 1 and 25 customers in year 2.The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Barry Company's cost effect of growth component?

• A)$7,500 favourable
• B)$28,500 favourable
• C)$7,500 unfavourable
• D)$28,500 unfavourable
• E)$30,000 favourable

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Definitions:

Net Present Value

A financial metric used to estimate the value of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows.

Cash Flows

Movements of money into or out of a business, project, or financial product, often analyzed for assessing financial health or the viability of investments.

Demand Management

The process of forecasting, planning for, and managing the demand for products and services to optimize supply chain performance.

Service Sector

The segment of the economy that includes trade, financial, lodging, education, legal, medical, and other professional occupations.