Strategic analysis of operating income.
1. Calculate the operating income of Stanmore Corporation in 2010 and 2011. Required
2. Calculate the growth, price recovery, and productivity components that explain the change in operating income from 2010 to 2011.
3. Comment on your answer in requirement 2. What do these components indicate?
|
2010 |
2011 |
||
|
Units of D4H produced and sold |
200 |
210 |
|
|
Selling price |
$40,000 |
$42,000 |
|
|
Direct materials (kilograms) |
300,000 |
310,000 |
|
|
Direct material cost per kilogram |
$8 |
$8.50 |
|
|
Manufacturing capacity in units of D4H |
250 |
250 |
|
|
Total conversion costs |
$2,000,000 |
$2,025,000 |
|
|
Conversion cost per unit of capacity (row 6 ÷ row 5) |
$8,000 |
$8,100 |
|
|
Selling and customer service capacity |
100 customers |
95 customers |
|
|
Total selling and customer service costs |
$1,000,000 |
$940,500 |
|
|
Selling and customer service capacity cost per customer(row 9 ÷ row 8) |
$10,000 |
$9,900 |