Answer the following questions using the information below:
Merrill Company makes a household appliance with model number X800. The goal for 2012 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 X800 units that can be produced. The industry market size for appliances increased 5% from 2011 to 2012. The following additional data are available for 2011 and 2012:

-Overall, was Merrill's strategy successful in 2012?
A)No, because the selling price per unit decreased.
B)No, because operating income decreased.
C)Yes, because less direct materials were used.
D)No, because more units were produced and sold.

Question

Answer the following questions using the information below:
Merrill Company makes a household appliance with model number X800. The goal for 2012 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 X800 units that can be produced. The industry market size for appliances increased 5% from 2011 to 2012. The following additional data are available for 2011 and 2012:
 
-Overall, was Merrill's strategy successful in 2012?
A)No, because the selling price per unit decreased. 
B)No, because operating income decreased. 
C)Yes, because less direct materials were used. 
D)No, because more units were produced and sold.

Quizplus · Accepted Answer

Operating income is a key indicator of a company's profitability. If it decreased, it suggests that the strategy was not successful in improving the company's financial performance.

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