QUESTION 2 Strategy and profitability analysis (15 marks)

Mikes Monitors Inc. (MM) manufactures a monitor called VIZI-Bright. The VIZI-Bright monitor is designed specifically to reduce eyestrain by using low blue light filter and flicker free technology.

MMs market is college and university students requiring good monitors at an economical price to reduce eyestrain while taking online courses. While most of the VISI-Bright monitors are sold online, they are also sold in university and college bookstores. Textbook publishers also package the monitors with textbook deals.

In the past year, MMs management team continued to develop manufacturing processes that focused on reducing manufacturing time of its units. Its purchasing team worked with suppliers that could provide the best quality parts at the lowest cost. Additionally, they increased their online marketing campaign to boost their sales.

Required

1. Identify MMs strategy. Give two pieces of evidence from the description that supports your choice. (3 marks)
2. Two of the Balanced Scorecard perspectives are listed in the first column of the following table: For each:
   • List one measure that is specific to Mikes Monitors as stated in the case.
   • An explanation as to why this measure is important to Mikes Monitors.

NOTE: If more than one entry is given in a cell only the first entry will be graded. (4 marks)

Perspective	Identify a measure specific to Mikes Monitors	Why is this measure important to Mikes Monitor?
Internal process
Learning and growth

(continued on the next page.)

QUESTION 2 (continued)

3. The following strategic analysis of profitability was taken from MMs last two years of operations. (8 marks)

	2019	Growth		Price Recovery		Product-ivity		2020
Revenue	$1,520,000	$570,000	F	$330,000	U	$ 0		$1,760,000
Costs
Direct materials	640,000	240,000	U	0		176,000	F	704,000
Conversion costs	560,000	0		0		40,000	F	520,000
Selling/cust.service capacity costs	27,000	0		5,400	U	0		32,400
Total costs	$1,227,000	$240,000	U	$ 5,400	U	$216,000	F	$1,256,400
Operating income	$ 293,000	$330,000	F	$335,400	U	$216,000	F	$ 503,600

REQUIRED: Using the data from the strategic analysis, answer the following:

	Growth	Price Recovery
Explain what likely caused the change in revenue (Relate your answer to MM)
Explain what likely caused the change in costs. (Relate your answer to MM)
Explain whether the change in operating income is in line with the MMs strategy you identified in part (a)