Refer to Exercise 12-21.
1. Calculate the amount and cost of unused administrative capacity at the beginning of 2017, based on the actual number of customers Dhyanchand served in 2017.
2. Suppose Dhyanchand can only add or reduce administrative capacity in increments of 250 customers.What is the maximum amount of costs that Dhyanchand can save in 2017 by downsizing administrative capacity?
3. What factors, other than cost, should Dhyanchand consider before it downsizes administrative capacity?

Exercise 12-21:

Dhyanchand & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers.Dhyanchand wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Dhyanchand T-shirt. Dhyanchand presents the following data for its first two years of operations,2016 and 2017.

Administrative costs depend on the number of customers Dhyanchand has created capacity to support, not on the actual number of customers served. Dhyanchand had 4,300 customers in 2016 and 4,200 customers in 2017.
1. Is Dhyanchand’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly the key measures Dhyanchand should include in its balanced scorecard and the reasons for doing so.

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1. Number of T-shirts purchased 2. Number of T-shirts discarded 3. Number of T-shirts sold (row 1 row 2) 4. Average selling price 5. Average cost per T-shirt 6. Administrative capacity (number of customers) 7. Administrative costs 8. Administrative cost per customer (row 7 + row 6) SS 2016 225,500 20,500 205,000 2017 257,000 24,000 233,000 $ 32.00 $ 33.00 17.00 $ 15.00 4,450 $ 4,700 $1,739,000 $1,691,000 $ 370 $ 380