Ashby Associates is an architectural firm located in Barbados that has been in practice only a few years. The market for architectural services is very competitive. To compete successfully, Ashby must deliver quality services at a low cost. Ashby presents the following data for 2018 and 2019. 2018 2019 1. Number of jobs billed 40 50 2. Selling price per job $32,000 $30,000 3. Architect labour hours 24,000 27,000 4. Cost per architect labour hour $35 $36 5. Architect/software support capacity (number of jobs the firm can do) 60 60 6. Total cost of software-implementation support $168,000 $180,000 7. Software-implementation support-capacity cost per job (row 6/row5) $2,800 $3,000 Architect labor-hour costs are variable costs. Architect (software) support costs for each year depending on the Architect support capacity that Ashby chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year. Required: i. Is Ashby Associates’ strategy for 2019 one of product differentiation or cost leadership? Explain briefly. ii. For each of the four perspectives (Financial, Customer, Internal Business Process, Learning and Growth) identify and describe two (2) key measures that you would include in Ashby’s 2019 balanced scorecard and your reasons for doing so. The following tabular format is recommended: PERSPECTIVES MEASURES REASONS iii. How might a consideration of social and environmental issues present an opportunity for Ashby Associates to pursue a product differentiation strategy?
Ashby Associates is an architectural firm located in Barbados that has been in practice only a few years. The market for architectural services is very competitive. To compete successfully, Ashby must deliver quality services at a low cost. Ashby presents the following
data for 2018 and 2019.
2018 2019
1. Number of jobs billed 40 50
2. Selling price per job $32,000 $30,000
3. Architect labour hours 24,000 27,000
4. Cost per architect labour hour $35 $36
5. Architect/software support capacity (number of jobs the firm can do) 60 60
6. Total cost of software-implementation support $168,000 $180,000
7. Software-implementation support-capacity cost per job (row 6/row5) $2,800 $3,000 Architect labor-hour costs are variable costs. Architect (software) support costs for each year depending on the Architect support capacity that Ashby chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year.
Required:
i. Is Ashby Associates’ strategy for 2019 one of product differentiation or cost leadership? Explain briefly.
ii. For each of the four perspectives (Financial, Customer, Internal Business Process, Learning and Growth) identify and describe two (2) key measures that you would include in Ashby’s 2019 balanced scorecard and your reasons for doing so.
The following tabular format is recommended:
PERSPECTIVES MEASURES REASONS
iii. How might a consideration of social and environmental issues present an opportunity for Ashby Associates to pursue a product differentiation strategy?
Innovating Motors Company makes electric cars and has two products, the hybrid and the brilliant. To produce the hybrid, Innovating Motors employed assets of $10,500,000 at the beginning of 2017 and $14,450,000 of assets at the end of 2017. Other costs to manufacture the
hybrid include the following:
Direct materials $5,000 per unit
Setup $1,500 per setup-hour
Production $ 415 per machine-hour
General administration and selling costs for hybrid total $7,820,000 in 2017. During the year, Innovating Motors produced 11,000 iHybrid cars using 6,000 setup hours and 139,000 machine hours. It sold these cars for $12,000 each.
Required:
i. Assuming that Innovating Motors defines investment as average assets during the period, what is the
ii. Calculate the residual income for hybrid if Innovating Motors has a required
iii. Based on its values and strategic thrusts, Innovating Motors is committed to sustainable development and therefore takes a long term perspective on profitability and divisional performance and is concerned about the overall performance of the organisation. Briefly discuss the implications for the use of residual income and return on investment in the
context of this company’s values.
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