Out of the two basic strategies, Cobalt's strategy is ________

Cobalt Company makes a household appliance with model number X500. The goal for 2015 is to improve product design and outlook. 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:

2014 2015
Units of X500 produced and sold 20,000 20,000
Selling price $150 $170
Direct materials (square feet) 30,000 32,500
Direct material costs per square foot $10 $10
Manufacturing capacity for X500 (units) 20,500 20,500
Total conversion costs $451,000 $493,250
Conversion costs per unit of capacity $22 $22.5

A) product differentiation because Cobalt is able to produce a given quantity of output with a lower cost of inputs
B) cost leadership because Cobalt is able to produce a given quantity of output with a lower cost of inputs
C) cost leadership because Cobalt is able to increase its output price faster than the increase in its input prices
D) product differentiation because Cobalt is able to increase its output price faster than the increase in its input prices

Answer: D