Answer the Following Questions Using the Information Below:
Following a Strategy

question 167

Multiple Choice

Answer the following questions using the information below:
Following a strategy of product differentiation, Arseniq Company makes a high-end Appliance, XT15. Arseniq presents the following data for the years 2014 and 2015:
$\begin{array}{lrr}&2014&2015\\\text { Units of XT15 produced and sold } & 50,000 & 52,500 \\\text { Selling price } & \$ 500 & \$ 550 \\\text { Direct materials (square feet) } & 150,000 & 153,750 \\\text { Direct materials costs per square foot } & \$ 50 & \$ 55 \\\text { Manufacturing capacity in units of XT15 } & 62,500 & 62,500\\\text { Total conversion costs } & \$ 6,250,000 & \$ 6,875,000 \\\text { Conversion costs per unit of capacity } & \$ 100 & \$ 110 \\\text { Selling and customer-service capacity (customers) } & 150 & 150 \\\text { Total selling and customer-service costs } & \$ 2,250,000 & \$ 2,343,750 \\\text { Selling and customer-service capacity cost per customer } & \$ 15,000 & \$ 15,625\end{array}$ Arseniq produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 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. Arseniq had 140 customers in 2014 and 145 customers in 2015.
-What is operating income for 2014?

• A) $9,000,000
• B) $11,200,000
• C) $11,440,000
• D) $9,207,000

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Definitions:

Specific Factor

An element or aspect that has a particular influence on an outcome or situation, distinguishing it from other variables.

Spearman's

Refers to Spearman's rank correlation coefficient, a statistical measure used to assess the strength and direction of association between two ranked variables.

Gardner's Theory

A theory proposed by Howard Gardner suggesting that intelligence is not a single general ability but a combination of multiple intelligences.

Multiple Intelligence

A theory proposed by Howard Gardner, suggesting that intelligence is not a single ability but consists of multiple intelligences, including linguistic, logical-mathematical, spatial, musical, bodily-kinesthetic, interpersonal, intrapersonal, and naturalistic.