Question

I can't solve required number 2 !

describe briefly key measures that you would include in Somerset’s balanced scorecard and the reasons for doing so.

Part 1: A) Pick two companies, go to their websites and identify their major strategies. B) Pick one of the companies from part (a) and go to the website of a competitor in the same industry. Now compare the strategies of both companies and list any similarities and differences. Part 2: Somerset Corporation makes a special-purpose machine, S4H, used in the textile industry. Somerset has designed the S4H machine for 2018 to be distinct from its competitors. It has been generally regarded as a superior machine. Somerset presents the following data for 2017 and 2018. 2017 5.000 $400 15,000 $40 Units of SH produced and sold Selling price Direct materials (pounds) Direct materials costs per pound Manufacturing capacity for S4H (units) 10,000 Conversion costs $1,000,000 Conversion costs per unit of capacity $100 Selling and customer-service capacity (customers) Total selling and customer service costs $360,000 Selling and customer service capacity cost per customer $6,000 2018 5,500 $440 15,375 $44 10,000 $1,100,000 $110 58 $362,500 $6,250 Somerset produces no defective machines, but it wants to reduce direct materials usage per S4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of S4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Somerset can support, not the actual number of customers it serves. Somerset has 75 customers in 2017 and 80 customers in 2018. Required: 1. Is Somerset's strategy one of product differentiation or cost leadership? Explain briefly. Describe briefly key measures that you would include in Somerset's balanced scorecard and the reasons for doing so. 3. Calculate the the revenue and cost effect of the price-recovery component, and What is the net effect on operating income as a result of the price-recovery component?

Answer 1

Key measures that should be included:

1.Direct materials pounds per machine:

This will help in controlling direct materials usage

2.Capacity utilization

This will help in controlling Conversion cost

3.Ratio of actual customers to Selling and Customer Service Capacity

This will help in controlling Selling and Customer Service Costs