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Odilon Company makes a household appliance with model number X500. The goal for 2019 is to reduce direct materials usage per unit.

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1)     Odilon Company makes a household appliance with model number X500. The goal for 2019 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 X500 units that can be produced. The industry market size for appliances increased 10% from 2018 to 2019. The following additional data are available for 2018 and 2019:

                                                                                                             2018                    2019

       Units of X500 produced and sold                                  10,000                11,000

       Selling price                                                                              $100                      $95

       Direct materials (square feet)                                        30,000                29,000

       Direct material costs per square foot                                  $9                      $10

       Manufacturing capacity for X500 (units)                   12,500                12,000

       Total conversion costs                                                 $250,000           $240,000

       Conversion costs per unit of capacity                                $20                      $20

a)      What is operating income for 2018?

b)     What is operating income for 2019?

 
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