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Author Question: Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, ... (Read 74 times)

mmm

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on: Mar 6, 2021
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:

20172018
Units of XT15 produced and sold54,00056,200
Selling price$400$470
Direct materials (square feet)154,000157,750
Direct materials costs per square foot$51$59
Manufacturing capacity in units of XT1563,50063,500
Total conversion costs$6,477,000$6,858,000
Conversion costs per unit of capacity$102$108
Selling and customer-service capacity (customers)150150
Total selling and customer-service costs$2,295,000$2,388,750
Selling and customer-service capacity cost per customer$15,300$15,925

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 135 customers in 2017 and 140 customers in 2018.

What is operating income for 2017?
◦ $4,974,000
◦ $7,860,000
◦ $7,269,000
◦ $5,203,500
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by mmm on Mar 6, 2021

memslove

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Reply #1 on: Mar 6, 2021
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mmm

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Reply 2 on: Mar 6, 2021
Excellent

ryhom

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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