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:

Conglomerates

Large corporations that consist of diverse companies or divisions operating in various industries or sectors, usually as a result of mergers or acquisitions.

Antitrust Enforcement

Government actions aimed at promoting competition among businesses by preventing monopolies, cartels, and other practices that restrict free trade.

Blurred Distinction

A situation where the clear differentiation between two concepts, categories, or objects becomes vague or ambiguous.

American And Foreign Companies

American and foreign companies differ mainly in their country of incorporation and operation, impacting their regulatory, tax, and market environment.