Trusted Products Company makes a household appliance with model number L800. 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 L800 units that can be produced. The industry market size for appliances increased 2% from 2017 to 2018. The following additional data are available for 2017 and 2018:

Overall, was Trusted Products's strategy successful in 2018?

Question

Trusted Products Company makes a household appliance with model number L800. 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 L800 units that can be produced. The industry market size for appliances increased 2% from 2017 to 2018. The following additional data are available for 2017 and 2018:

Overall, was Trusted Products's strategy successful in 2018?

Quizplus · Accepted Answer

Change in revenue (31,620 × $290) - (31,000 × 310) = $440,200 U
Change in materials costs (96,500 × $36) - (98,000 × $34) = $142,000 U
Change in conversion costs ($1,162,500 - $1,120,500) = $42,000 F
Change in operating income $540,200 U

Trusted Products Company Makes a Household Appliance with Model Number