The price recovery component of the change in

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Chapter 23 / Exercise PE23-5A
Accounting
Reeve/Warren
Expert Verified
42) The price-recovery component of the change in operating income measures solely the effect of price changes on revenues but not costs.
Diff: 1Objective: 4AACSB: Analytical thinking43) When analyzing the change in operating income, the strategy component of growth willincrease when more units are sold.
Diff: 2Objective: 4AACSB: Application of knowledge44) The revenue effect of growth is calculated by multiplying the difference in units sold (current year minus the previous year) by selling price in the current year.
Diff: 2Objective: 4AACSB: Analytical thinking45) Cost effect of productivity for fixed costs is calculated by multiplying the difference in units of capacity (current year capacity units minus the previous year capacity units) by price per unit of capacity of the previous year.
Diff: 2Objective: 4AACSB: Analytical thinking46) The productivity component measures the amount by which operating income increasesby using inputs efficiently to lower costs.
Diff: 1Objective: 4AACSB: Application of knowledge47) An increase in production capacity will always result in a favorable cost effect of productivity for variable costs in the short run.
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Chapter 23 / Exercise PE23-5A
Accounting
Reeve/Warren
Expert Verified
Diff: 2Objective: 4AACSB: Application of knowledge48) An analysis of Revere Beach Corporation's operating income changes between 2017 and 2018 show the following: Operating income for 2017$4,750,000Add growth component180,000Deduct price-recovery component(60,000)Add productivity component285,000Operating income for 2018$5,155,000Required: Is Revere's operating income gain consistent with the product differentiation or cost leadership strategy? Explain briefly.
Diff: 3Objective: 4AACSB: Application of knowledge

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