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ruskin ruskin
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Posts: 664
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7 years ago
An analysis of Louis Brown Corporation's operating income changes between year 1 and year 2 show the following:

Operating income for Year 1   $1,000,000
Add growth component   30,000
Add price-recovery component   200,000
Deduct productivity component     (10,000)
Operating income for Year 2   $1,220,000

Required:
Is Louis Brown's operating income gain consistent with the product differentiation or cost leadership strategy? Explain briefly.
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
Authors:
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wrote...
#1
7 years ago
Louis Brown's operating income gain is consistent with the product differentiation strategy since the increase in operating income was driven by the $200,000 gain in the price-recovery component. It appears that Brown's superior quality stimulated slight growth and allowed it to charge a price premium for its products.
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