Hans Kenneth N.

Tong

2021 2022
Units produced and sold 40,000 42,000 units
Selling Price 100 110 pesos
Direct materials (square feet) 120,000 123,000 sq. ft.
Direct materials cost per square foot 10 11 pesos
Manufacturing capacity 50,000 50,000 units
Conversion costs 1,000,000 1,100,000 pesos
Conversion cost per unit of capacity (6 ÷ 5) 20 22 pesos
Selling & customer service capacity 30 29 customers
Selling & customer service cost 720,000 725,000 pesos
Cost per customer of selling & service capacity (9÷8) 24,000 25,000 pesos

No. of customers 23 25

Requirement 1
Describe briefly the elements you would include in La Germania’s balanced scorecard

I would include Revenue Growth, Oprerating income growth, cutomer service capacity, manufacturing
capacity, number of customers, and efficiency of manufacturing hood.

Requirement 2
Calculate the growth, price-recovery, and productivity components that explain the change in
operating income from 2021 to 2022
Growth Component
2021 2022
Revenues 4000000 4620000
Costs
Direct Materials 1200000 1353000
Conversion Costs 1000000 1100000
Selling & customer service cost 720000 725000
Total Costs 2920000 3178000
Operating Income 1080000 1442000
Change in operating income 362000 Favorable

Actual units sold in 2022 42,000

Actual units sold in 2021 40,000
2,000
Selling Price in previouse year 100
Revuenue Effect of growth 200000
Units produced 2022 42,000
Units produced 2021 40,000
1.05
Direct materials for 2021 120,000
Required input 126000
Direct materials for 2021 120,000
6,000
Direct materials price for 2021 10
Cost Effect Growth for Direct Materials 60000 Unfavorable

Manufacturing capacity 2021 50,000

Manufacturing capacity 2021 50,000
0.00
Direct materials for 2021 20
Cost Effect Growth for Convertion Cost 0 Favorable

Selling & Customer Service Capacity 2021 30

Selling & Customer Service Capacity 2021 30
0.00
Cost per customer for 2021 24,000
Cost Effect Growth for Selling & customer service costs 0 Favorable

Revuenue Effect of growth 200000 F

Cost Effect of Growth
Direct Materials 60000
Convertion Cost 0
Selling & customer service costs 0 60000 U
Change in operating income due to growth 140000 F

Price- Recovery Component

Selling Price 2022 110

Selling Price 2021 100
10
Actual units 2022 42,000
Revenue Effect of Price Recovery 420,000 Favorable

Direct materials cost per square foot 2022 11

Direct materials cost per square foot 2021 10
1
126,000
Cost effect of Price recovery for Direct materials 126,000 Unfavorable

Conversion cost per unit of capacity 2022 22

Conversion cost per unit of capacity 2021 20
2
50,000
Cost effect of Price recovery for Conversion cost 100,000 Unfavorable
Cost per customer of selling & service 2022 25,000
Cost per customer of selling & service 2021 24,000
1,000
30
Cost effect of Price recovery for Cost per customer 30,000 Unfavorable

Revenue effect of price recovery 420,000 F

Cost effect of price recovery
Direct Materials 126,000
Convertion Cost 100,000
Selling & customer service costs 30000 256,000 U
Change in operating income due to price recovery 164000 F

Productivity Component

Direct materials 2022 123,000

Direct materials required to produce in 2021 126000
-3,000
Direct materials cost per sq. meter 2022 11
Cost effect productivity for direct materials -33000 Favorable

Actual units of capcity 2022 50,000

Actual units of capcity 2021 50,000
0
Price per unit of capacity 2022 22
Cost effect productivity for Conversion cost 0 Favorable

Selling & customer service capcity 2022 29

Selling & customer service capcity 2021 30
-1
Price per unit of capacity 2022 25,000
Cost effect productivity for Cost per customer -25000 Favorable

Cost Effect of productivity

Direct Materials - 33,000 F
Convertion Cost - F
Selling & customer service costs -25000 F
Change in operating income due to price recovery - 58,000 F

Revenue &
Revenue & Cost Effects of
cost effects of Price_x0002_Recove
Growth ry
Income Statement Amounts Component in Component in
in 2021 2022 2022
Revenue 4000000 200000 420,000
Costs 2920000 60000 256,000
1080000 140000 164000
F F F

Requirement 3

Suppose during 2022, the market size for La Germania kitchen ranges grew 3% in terms of number of units and all
increases in market share (that is, increases in the number of units sold greater than 3%) are due to La
Germania’s product differentiation strategy. Calculate how much of the change in operating income from 2021 –
2022 is due to the industry market size factor, cost leadership and product differentiation.
Market Size Growth rate 3%

Units of increased market size 1,200

Units of increased sales 2,000
0.60
Change in operating income due to growth 140000
Change in operating income due to Growth in
industry market size 84000 Favorable

Change in operating income due to product differentiation 256,000 Unfavorable

Productivity Component 58,000 Favorable
Effect of strategic decision to reduce price 420,000 Favorable
Growth in market share due to productivity
improvement and strategic Decision to reduce
price 56000 Favorable
Change in operating income due to cost leadership 534,000 Favorable

Change due to industry market size 84000 Favorable

Change due to product differentiation 256,000 Unfavorable
Change due to product differentiation 534,000 Favorable
Change in operating income 362,000 Favorable

Requirement 4
How successful has La Germania been in implementing its strategy? Explain

La Germania was very successful in implementing

its strategy because they have gained favorable
results from their implementatio; resulting with a
362,000peso increase of operating income.
 Cost Effect of Income
Productivity Statement
Component in Amounts in
2022 2022
4620000
- 58,000 3178000
58,000 1442000 362000
F F