Melissa Corporation makes a special- purpose machine, D4H, used in the textile industry. Melissa has designed the D4H machine for 2012 to be distinct from its competitors. It has been generally regarded as a superior machine. Melissa presents the following data for 2011 and 2012.

Melissa produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2012. 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 number of customers that Melissa can support, not the actual number of customers it serves. Melissa had 77 customers in 2011 and 82 customers in 2012.

Required
1. Is Melissa’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key measures that you would include in Melissa’s balanced scorecard and the reasons for doingso.

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2011 2012 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 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 10. Selling and customer-service capacity cost per 290 $38,000 290,000 $8.25 300 $2,175,000 $7,250 5 customers 120 customers $1,164,000 $9,700 270 $36,000 285,000 $8.00 300 $2,100,000 $7,000 $1,225,000 $9,800 customer (row 9 row 8)