Meale Company Makes a Household Appliance with Model Number X500

Multiple Choice

Meale Company makes a household appliance with model number X500. The goal for 2015 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 2014 to 2015. The following additional data are available for 2014 and 2015:
$\begin{array}{lrr}&2014&2015\\\text { Units of } X 500 \text { produced and sold } & 10,000 & 11,000 \\\text { Selling price } & \$ 100 & \$ 95 \\\text { Direct materials (square feet) } & 30,000 & 29,000 \\\text { Direct material costs per square foot } & \$ 10 & \$ 11\\\text { Manufacturing capacity for } X 500 \text { (units) } & 12,500 & 12,000 \\\text { Total conversion costs } & \$ 250,000 & \$ 240,000 \\\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20\end{array}$
-What is operating income for 2015?

A) $1,045,000
B) $726,000
C) $486,000
D) $476,000