Business, 18.03.2021 01:10 fernandezvela27

Following a strategy of product differentiation, Taylor Corporation makes a high-end computer monitor, CT20. Taylor Corporation presents the following data for the years 2018 and 2019: 2018 2019
Units of CT20 produced and sold 5,000 5,300
Selling Price $410 $440
Direct materials (pounds) 15,000 15,375
Direct materials costs per pound $42 $44
Manufacturing capacity for CT20 (units) 10,000 9,500
Conversion costs $1,000,000 $1,045,000
Conversion costs per unit of capacity $100 $110
Selling and customer-service costs 60 58
Total selling and customer-service costs $360,000 $362,500
Selling and customer - service capacity cost per customer $6,000 $6250

Somerset Corporation produces no defective units but it wants to reduce direct materials usage per unit in 2018. Manufacturing conversion costs in each year depend on production capacity defined in terms of 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 growth component?
b. What is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component?

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Following a strategy of product differentiation, Taylor Corporation makes a high-end computer monito...

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