2016 2017 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 200 210 $40,000 $42,000 300,000 310,000 $8.50 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 ÷ row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 250 250 $2,000,000 $2,025,000 $8,000 $8,100 100 customers 95 customers $1,000,000 $940,500 10. Selling and customer-service capacity cost per customer (row 9 + row 8) $10,000 $9,900 Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the num- ber of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017. 1. Is Stanmore's strategy one of product differentiation or cost leadership? Explain briefly. 2. Describe briefly key measures that you would include in Stanmore's balanced scorecard and the rea- sons for doing so. Required

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017.

2016
2017
1. Units of D4H produced and sold
2. Selling price
3. Direct materials (kilograms)
4. Direct material cost per kilogram
200
210
$40,000
$42,000
300,000
310,000
$8.50
5. Manufacturing capacity in units of D4H
6. Total conversion costs
7. Conversion cost per unit of capacity (row 6 ÷ row 5)
8. Selling and customer-service capacity
9. Total selling and customer-service costs
250
250
$2,000,000
$2,025,000
$8,000
$8,100
100 customers
95 customers
$1,000,000
$940,500
10. Selling and customer-service capacity cost per customer
(row 9 + row 8)
$10,000
$9,900
Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine
in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that
can be produced, not the actual units produced. Selling and customer-service costs depend on the num-
ber of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has
75 customers in 2016 and 80 customers in 2017.
1. Is Stanmore's strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key measures that you would include in Stanmore's balanced scorecard and the rea-
sons for doing so.
Required

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