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Author Question: Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, ... (Read 53 times)

vicotolentino

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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 sold55,00058,500
Selling price$400$440
Direct materials (square feet)150,000153,300
Direct materials costs per square foot$51$55
Manufacturing capacity in units of XT1562,70062,700
Total conversion costs$6,270,000$6,708,900
Conversion costs per unit of capacity$100$107
Selling and customer-service capacity (customers)150150
Total selling and customer-service costs$2,325,000$2,426,250
Selling and customer-service capacity cost per customer$15,500$16,175

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 the change in operating income from 2017 to 2018?
◦ $2,418,350 U
◦ $3,740,000 F
◦ $2,418,350  F
◦ $3,740,000 U
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by vicotolentino on Mar 6, 2021

SamMuagrove

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Reply #1 on: Mar 6, 2021
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vicotolentino

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Reply 2 on: Mar 6, 2021
Thanks for the timely response, appreciate it

vickybb89

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Reply 3 on: Yesterday
Wow, this really help

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