Change in operating income due to price recovery

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Change in operating income due to price recovery 224462 F Change in operating income due to productivity 141304 F Suppose that during 2011, the market for Meredith's special-purpose machines grew by 5.00% . All increases in market share (that is, sales increases greater than 5.00% are the result of Meredith's strategic actions. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Requirement 1: Unit Increase Change in operating income Growth Component x (From Market size / Total Unit increase) = due to industry-market size 569234 13 20 370002.1 F 370002 ROUND THIS FROM ABOVE OR IT IS WRONG Unit Increase Growth in market share Growth Component x (From Market size / Total Unit increase) = due to product differentiation 569234 7 20 199231.9 F 199232 ROUND THIS FROM ABOVE OR IT IS WRONG Growth in market share due to product differentiation 199232 F Revenue effect of price recovery 560000 F Cost effect of price recovery 335538 U Change in operating income due to product differentiation 423694 F Change in operating income due to cost leadership 141304 F Change in operating income due to industry-market-size 370002 F Change in operating income due to product differentiation 423694 F Change in operating income due to cost leadership 141304 F Total change in operating income 935000 F 45.3148663 % ROUND TO NEAREST PERCENT
E13-21 Page 2 Rinaldo & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Rinaldo wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Rinaldo T-shirt. Rinaldo presents the following data for its first two years of operations, 2010 and 2011. 2010 2011 Number of T-shirts purchased 203000 251000 Number of T-shirts discarded 3000 4000 Number of T-shirts sold (row 1 – row 2) 200000 247000 Average selling price 26 27 Average cost per T-shirt 11 9 Administrative capacity (number of customers) 4100 3850 Adminstrative costs 1271000 1232000 Administrative cost per customer (row 7/row 6) 310 320 Administrative cost depend on the number of customers that Rinaldo has created capacity to support, not on the actual number of customers served. Rinaldo had 3700 customers in 2010 and 3600 customers in 2011. Requirement 1 Administrative cost per customer x Amount of unused capacity = Cost of unused capacity 320 500 160000 Requirement 2 150 increments Numbers of units reduced x Administrative cost per customer = Maximum costs saved by downsizing 150 320 48000 RAIMUNDO SHOULD CONSIDER WHETHER SALES INCREASES IN THE FUTURE WOULD LEAD TO A GREATER DEMAND FOR AND UTILIZATION OF CAPACITY AS NEW CUSTOMERS ARE DRAWN TO RAIMUNDO'S DISTINCTIVE PRODUCTS, CUSTOMER SERVICE MAY BE THE KEY TO NUEW CUSTOMER RENETION AND FURTHER GROWTH RAIMUNDO SHOULD REALIZE THE MARKET FEEDBACK OFTENPROVIDED BY CUSTOMER SERVICE STAFF IS PROBABLY KEY TO RAIMUDNO'S CUTTING EDGE FASHION STRATEGY; SOME OF THIS MAY BE LOST IF ADMINISRATIVE CAPACITY IS CUST BACK
E13-25 Page 3 Memorial Corporation makes a special-purpose machine, D4H, used in the textile industry. Memorial has designed the D4H machine For 2011 to be distinct from its competitors. It has been generally regarded as a superior machine. Memorial presents the following data For 2010 and 2011. 2010 2011

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