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.