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

question 165

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 the cost effect of the price-recovery component?

• A) $375,000 F
• B) $375,000 U
• C) $1,506,250 U
• D) $1,506,250 F

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Definitions:

Conversational Analysis

A methodology in sociolinguistics and sociology that studies the structure and patterns of conversation to understand social interactions.

Positive Responses

Positive Responses are affirmative reactions or feedback to stimuli, interactions, or situations, suggesting agreement, approval, or pleasure.

Ethnomethodological

Pertaining to the study of the methods people use in everyday life to create a sense of social order and understand their world.

Indifference

A lack of interest, concern, or sympathy towards others or certain situations.