Refer to Exercise 12-22. Suppose that the market for silk-screened T-shirts grew by 10% during 2017. All increases in sales greater than 10% are the result of Dhyanchand’s strategic actions.Calculate the change in operating income from 2016 to 2017 due to growth in market size, product differentiation,and cost leadership. How successful has Dhyanchand been in implementing its strategy? Explain.

Exercise 12-22:

Refer to Exercise 12-21.
1. Calculate Dhyanchand’s operating income in both 2016 and 2017.
2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017.
3. Comment on your answers in requirement 2. What do each of these components indicate?

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.

Transcribed Image Text:

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