Answer the Following Questions Using the Information Below:
Strategic Analysis

question 83

Multiple Choice

Answer the following questions using the information below:
Strategic Analysis of Profitability of Ransham Company:
$\begin{array}{|l|l|l|l|l|l|}\hline&\text { Income } & \text { Revenueand } & \text { Revenueand } & & \\&\text { Statement } & \text { Cost Effects } & \text { Cost Effects of } & \text { Cost Effect of } & \text { Income } \\&&\text { of Growth } & \text { Price-Recovery } & \text { Productivity } & \text { Statement } \\\text { Amounts } & \text { Component } & \text { Component } & \text { Component } & \text { Amounts } \\&\text { in 2014 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } & \text { in 2015 } \\\hline \text { Revenues }(\$) & 34,000 & 10,000 \mathrm{~F} & 1,000 \mathrm{U} & (\mathrm{b}) & (\mathrm{e}) \\\hline \text { Costs } & 23,500 & (\mathrm{a}) & 500 \mathrm{U} & \text { (c) } & 26,100 \\\hline \text { Operating } & & & & & \\\text { income } & 10,500 & 5,500 \mathrm{~F} & 1,500 \mathrm{U} & 2,400 \mathrm{~F} & \text { (d) } \\\hline\end{array}$
-What is the cost effect of the productivity component (c) ?

• A) $0
• B) $1,200 U
• C) $900 F
• D) $2,400 F

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Definitions:

Consolidated Statement of Retained Earnings

A financial statement that shows the changes in a corporation's retained earnings over a specific period, combining the retained earnings of the parent company with those of its subsidiaries.

FVE Method

Refers to the Fair Value Evaluation method, a technique for assessing an asset's worth at its current market value.

Consolidated Net Income

The total amount of net income earned by a parent company and its subsidiaries, after intercompany transactions have been eliminated.

Equity Method

An accounting technique used by a company to record its investment in another company where it has significant influence but not full control, usually through the ownership of 20-50% of the voting stock.