Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 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 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
$\begin{array}{lrr}&2014&2015\
\text { Units of L800 produced and sold } & 30,000 & 31,500 \
\text { Selling price } & \$ 300 & \$ 285 \
\text { Direct materials (square feet) } & 90,000 & 87,000 \
\text { Direct material costs per square foot } & \$ 30 & \$ 33\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \
\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \
\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60
\end{array}$
-What is the revenue effect of the growth component?

Question

Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 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 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
 $\begin{array}{lrr}&2014&2015\
\text { Units of L800 produced and sold } & 30,000 & 31,500 \
\text { Selling price } & \$ 300 & \$ 285 \
\text { Direct materials (square feet) } & 90,000 & 87,000 \
\text { Direct material costs per square foot } & \$ 30 & \$ 33\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \
\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \
\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60
\end{array}$
-What is the revenue effect of the growth component?

Quizplus · Accepted Answer

The revenue effect of the growth component is calculated by multiplying the increase in units sold due to market growth by the selling price in 2014. The market grew by 5%, so the expected increase in units sold is 30,000 * 5% = 1,500 units. The selling price in 2014 was $300, so the revenue effect is 1,500 * $300 = $450,000 F (favorable).

Answer the Following Questions Using the Information Below: Crynton Company

Answer the Following Questions Using the Information Below:
Crynton Company