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

question 158

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:
Present the following,
a.The change in operating income from cost leadership.
b.The change in operating income due to industry wide effects.
c.The effect of product differentiation on operating income and a summarization of the change in operating income between Year 1 to Year 2.

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Definitions:

Deafness

Having a diminished ability to hear or complete hearing loss.

Natural Hearing

The ability to perceive sound through the ear's normal anatomical structure and neural processes without the aid of any artificial devices.

Echolocation

The biological sonar used by several kinds of animals to navigate and to locate prey or other objects by emitting sound and listening to the echoes.

Ventral Auditory Pathway

A pathway in the brain involved in processing the aspects of sound related to meaning and speech comprehension.