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

question 78

Essay

Use the information below to answer the following question(s).
Following a strategy of product differentiation,Ernsting Ltd.makes high quality electronic components.Ernsting Ltd.presents the following data for the past two years relating to its XJ649 product.
Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 .Manufacturing conversion costs in each year depend on production capacity defined in terms of 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.Ernsting has 60 customers in Year 1 and 66 customers in Year 2.The industry market size for the product increased 6% from Year 1 to Year 2.Of the $50 increase in unit selling price,$30 is attributable to a general price increase.
-Required:
a.What amount is the revenue effect of the price-recovery component?
b.What amount is the cost effect of the price-recovery component?
c.What is the net effect on operating income as a result of the price-recovery component?
d.What is the net effect on operating income as a result of the productivity component?

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Definitions:

Data Processing

The collection, manipulation, and analysis of data to extract useful information, support decision-making, or fulfill specific purposes.

Dashboard Functionality

Definition: The features offered by a digital dashboard, which displays key data points and metrics in a simplified and understandable format, often for the purpose of tracking performance.

Distribution

Definition: The process of making a product or service available for the consumers or business users who need it, through various channels.

Data Analytics

The process of examining datasets to draw conclusions and identify patterns, trends, and insights using specialized systems and software.