Following a Strategy of Product Differentiation,Izzy's Limited Company Makes a High-End

question 95

Multiple Choice

Following a strategy of product differentiation,Izzy's Limited Company makes a high-end Appliance,XT15.Izzy's Limited presents the following data for the years 2017 and 2018:

Izzy's Limited 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.Izzy's Limited had 145 customers in 2017 and 150 customers in 2018.
What is the net effect on operating income as a result of the productivity component? (Round any intermediary calculations to two decimals and your final answer to the nearest dollar. )

• A)$1,664,016 U
• B)$124,672 F
• C)$1,664,016 F
• D)$124,672 U

---

Definitions:

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company is using its equity to generate profits.

Dividend Growth Rate

The annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time.

Earnings

The net profits of a company after all expenses have been deducted from revenues.

Earnings Reinvested

Profits that are not paid out as dividends but are instead reinvested in the business to fund growth or pay down debt.