Answer the following questions using the information below:
Wingard Company makes a household appliance with model number X200. The goal for 2012 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 X200 units that can be produced. The industry market size for appliances increased 10% from 2011 to 2012. The following additional data are available for 2011 and 2012:

-What is the cost effect of the price-recovery component?
A)$30,500 F
B)$31,500 U
C)$2,500 F
D)$33,000 U

Question

Answer the following questions using the information below:
Wingard Company makes a household appliance with model number X200. The goal for 2012 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 X200 units that can be produced. The industry market size for appliances increased 10% from 2011 to 2012. The following additional data are available for 2011 and 2012:
 
-What is the cost effect of the price-recovery component?
A)$30,500 F 
B)$31,500 U 
C)$2,500 F 
D)$33,000 U

Quizplus · Accepted Answer

The price-recovery component measures the effect of changes in selling prices on operating income. A $33,000 unfavorable (U) effect indicates that the selling prices decreased, reducing operating income.

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