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Author Question: Following a strategy of product differentiation, Somerset Corporation makes a high-end computer ... (Read 84 times)

nummyann

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on: Mar 6, 2021
Following a strategy of product differentiation, Somerset Corporation makes a high-end computer monitor, CM7. Somerset Corporation presents the following data for the years 2017 and 2018: 

20172018
Units of CM7 produced and sold5,0005,500
Selling price$400$440
Direct materials (pounds)15,00015,375
Direct materials costs per pound$40$44
Manufacturing capacity for CM12 (units)10,00010,000
Conversion costs$1,000,000$1,100,000
Conversion costs per unit of capacity$100$110
Selling and customer-service capacity (customers)6058
Total selling and customer-service costs$360,000$362,500
Selling and customer-service capacity cost per customer$6,000$6,250

Somerset Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM7 in 2017. Manufacturing conversion costs in each year depend on production capacity defined in terms of CM7 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. Ernsting Corporation has 100 customers in 2017 and 115 customers in 2018. The industry market size for high-end computer monitors increased 5% from 2017 to 2018. 

Required: 
a.What is the revenue effect of the price-recovery component?
b.What is the cost effect of the price-recovery component?
c.What is the net effect on operating income as a result of the price-recovery component?
d.What is the net effect on operating income as a result of the productivity component? 
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by nummyann on Mar 6, 2021

wuly

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Reply #1 on: Mar 6, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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nummyann

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Reply 2 on: Mar 6, 2021
Great answer, keep it coming :)

covalentbond

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Reply 3 on: Yesterday
:D TYSM

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