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  3. calculate the growth (both revenue and cost effect

Calculate the growth (both revenue and cost effect), price-recovery (both revenue and cost effect), and...

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Accounting

Calculate the growth (both revenue and cost effect), price-recovery (both revenue and cost effect), and productivity components that explain the change in operating income from 2015 to 2016. (10 marks)

Revenue effect of growth: (21,500-19,000) X $23= $57, 500

Cost effect of growth: [((47,500/19,000) X 21,500 47,500) X $1.25] + [(23,000 23,000) X $5] + ((100-100 X 110) = $7,812.50

Revenue effect of price recovery: ($26 - $23) X 21, 500= $64,500

Cost effect of price recovery: (($1.35-$1.25) X (47,500/19,000*21,500)) + (($6.50-$5 X 23,000) + (100-120) X $105 =($2,100)

Cost effect of productivity: ((51,600- (47,500/19,000*21,500)) X $1.35) + ((100-120) X $105) =($5,002.50)

Question: What type of strategy is Dubbledore pursuing: cost leadership or value leadership? Support your answer using the variances calculated in question 2 (i.e., explain how the variances may demonstrate the company is pursuing a particular strategy)

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