Foley Products Company makes a household appliance with model number X500. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 8% from 2017 to 2018. The following additional data are available for 2017 and 2018: 2017 2018 Units of X500 produced and sold 16,000 17,600 Selling price $140 $133 Direct materials (square feet) 36,000 35,000 Direct material costs per square foot $10 $13 Manufacturing capacity for X500 (units) 12,500 11,800 Total conversion costs $350,000 $330,400 What is the change in operating income? A) $1,530,000 B) $25,400 C) $121,400 D) $122,100 5. What is the variable cost effect of the price recovery component? A. $118,800 U B. $118,800 F C. $125,600 U D. $125,600 F 6. What is the change in operating income due to market size growth? A. $188,000 F B. $150,400 F C. $37,600 F D. $20,320 F
Foley Products Company makes a household appliance with model number X500. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 8% from 2017 to 2018. The following additional data are available for 2017 and 2018: 2017 2018 Units of X500 produced and sold 16,000 17,600 Selling price $140 $133 Direct materials (square feet) 36,000 35,000 Direct material costs per square foot $10 $13 Manufacturing capacity for X500 (units) 12,500 11,800 Total conversion costs $350,000 $330,400 What is the change in operating income? A) $1,530,000 B) $25,400 C) $121,400 D) $122,100 5. What is the variable cost effect of the price recovery component? A. $118,800 U B. $118,800 F C. $125,600 U D. $125,600 F 6. What is the change in operating income due to market size growth? A. $188,000 F B. $150,400 F C. $37,600 F D. $20,320 F
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Foley Products Company makes a household appliance with model number X500. The
goal for 2018 is to reduce direct materials usage per unit. No defective units are
currently produced. Manufacturing conversion costs depend on production capacity
defined in terms of X500 units that can be produced. The industry market size for
appliances increased 8% from 2017 to 2018. The following additional data are available
for 2017 and 2018:
2017 2018
Units of X500 produced and sold 16,000 17,600
Selling price $140 $133
Direct materials (square feet) 36,000 35,000
Direct material costs per square foot $10 $13
Manufacturing capacity for X500 (units) 12,500 11,800
Total conversion costs $350,000 $330,400
What is the change in operating income?
A) $1,530,000
B) $25,400
C) $121,400
D) $122,100
5. What is the variable cost effect of the price recovery component?
A. $118,800 U
B. $118,800 F
C. $125,600 U
D. $125,600 F
6. What is the change in operating income due to market size growth?
A. $188,000 F
B. $150,400 F
C. $37,600 F
D. $20,320 F
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