Meredith Ltd makes a special-purpose machine D4H used in the textile industry. Meredith has designed the D4H machine for 2018 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data for the years 2017 and 2018. 

Meredith produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2018. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units of D4H produced. Selling and customer-service costs depend on the number of customers that Meredith can support, not the actual number of customers Meredith serves. Meredith has 75 customers in 2017 and 80 customers in 2018. At the start of each year, management uses its discretion to determine the number of design sta for the year. The design sta and 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.

Transcribed Image Text:

2017 2018 1 Units of D4H produced and sold 2 Selling price 3 Direct materials (kilograms) 4 Direct materials cost per kilogram 5 Manufacturing capacity in units of D4H 6 Total conversion costs 200 210 £40 000 £42 000 300 000 310 000 £8 £8.50 250 250 £2 000 000 £2 025 000 7 Conversion costs per unit of capacity 8 Selling and customer-service capacity 9 Total selling and customer-service costs 10 Selling and customer-service capacity £8 000 £8 100 100 customers 95 customers £1 000 000 £940 500 cost per customer £10 000 £9 900 11 Design staff 12 Total design costs 13 Design costs per employee 12 12 £1 200 000 £1 212 000 £100 000 £101 000