Refer to Exercise 13-29.

Data From Exercise 13.29

Krater Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm’s services is very competitive. To compete successfully, Krater must deliver quality services at a low cost. Krater presents the following data for 2019 and 2020.

Required

Architect labor-hour costs are variable costs. Architect support costs for each year depend on the architect support capacity that Krater 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.
1. Is Krater Associate’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe key measures you would include in Krater’s balanced scorecard and your reasons for doing so.

Required

1. Calculate the operating income of Krater Associates in 2019 and 2020.
2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020.
3. Comment on your answer in requirement 2. What do these components indicate?

Transcribed Image Text:

1. Number of jobs billed Selling price per job 3. Architect labor-hours 2. 4. Cost per architect labor-hour 5. Architect support capacity (number of jobs the firm can do) 6. Total cost of software-implementation support 7. Software-implementation support-capacity cost per job 2019 44 $36,000 19,000 $38 61 $164,700 $2,700 2020 46 $35,000 30,000 $39 61 $176,900 $2,900