Meredith Corporation makes a special-purpose machine, D4H, used in the textile industry. Meredith has designed the D4H machine for 2006 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data for 2005 and 2006?

Meredith produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2006. 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 Meredith can support, not the actual number of customers it serves. Meredith has 75 customers in 2005 and 80 customers in 2006. At the start of each year, management uses its discretion to determine the number of design staff for the year. The design staff and its costs have no direct relationship with the quantity of D4H produced or the number of customers to whom D4H is sold.
Required
1. Is Meredith's strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key elements that you would include in Meredith's balanced scorecard and the reasons for doing so?

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2005 2006 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 8. Selling and customer-service capacity 9. Total selling and customer-service costs 200 S40,000 300,000 $8 250 S2,000,000 $8,000 100 customers $1,000,000 210 $42,000 310,000 S8.50 250 $2,025,000 $8,100 95 customers 940,500 10. Selling and customer-service capacity cost per customer 11. Design staff 12. Total design costs 13. Design cost per employee $10,000 12 $1,200,000 $100,000 $9,900 12 $1,212,000 $101,000