E12-21

1, The company offer Trend setting design, distinctive design

for teenager => the company is more likely to pursuit differentiation
strategy
2,
Financial perspective (1) increase in operating income from
charging higher margins, (2) price
premium earned on products
These measures will indicate whether
Dhyanchand has been able to charge
premium prices and achive operating
income increases through product
differentiation
Customer perspective (1) Market share in distinctive, name-brand

Internal business perspective Quality of silk-screening (number of colors

 use of glitter, durability of the design),
(2) frequency of new designs (number of
new product), (3) time bw concept and
delivery of design (new-product
development time)
Improvements in these measures are

Learning and growth perspective (1) Ability to attract and retain talented
designers (turnover of designers (2)
improvements in silk-screening
processes (percentage of suggestions) (3)
E 12-22
1, Operating Income Statement
2016 2017
Revenues 6,560,000 7,689,000
Costs
T-shirts purchased 3,833,500 3,855,000
Administrative costs 1,739,000 1,691,000
Total costs 5,572,500 5,546,000
Operaing income 987,500 2,143,000

2, Growth component ( change in volume/quantity)

Revenue effect of growth = (Actual units of output sold in the current period - Actual units of
output sold in the prior period) x Prior Period Selling price
896,000 F (sell more)
Direct Materials Required 256,300 (Units of input required)

Cost effect of growth for Variable costs = (Units of input required to produce current output in the
prior period - Actual units of input used to produce prior period output)*Prior period input price
(Units of input required to produce 2017 output in 2016 - Units of input used to produce 2016 output)*Input price
Costs effect of growth for Fixed Costs = (Actual units of capacity in Prior period to Produce
current period Output - Actual Units of Capacity in the prior period)* Prior period price per unit of
capacity
Cost effects of growth component:
Direct materials costs 523,600 U
Administrative costs -
Cost effect of growth 523,600 U

In summary, the change in operating income due to growth component

Revenue effect of growth 896,000 F
Cost effect of growth 523,600 U
Change in operating income due to growth 372,400 F

The Price-Recovery Component ( Change in price)

(SP in 2017 - SP in 20

(Input price in 2017 - i

= ($15-$17)* 256,300

Direct materials costs (512,600)

(Price per unit of capacity I 2017 - Price per unit of capacity in 2016)*Actual units of capacity in 2016 to produce
= ($380-$370)*4,700= $47,000U

In summary, the change in operating income due to price-recovery component

Revenue effect of price-recovery $ 233,000 F
Cost effect of price-recovery for VC $ 512,600 F
Cost effect of price-recovery for FC $ 47,000 U
Change in operating income due to price recovery $ 698,600 F
Productivity component (change in proportion of input/output)
Cost effect of productivity for variable cost = (Actual units of inputs used to produce 2017 output - Units of iput r
= (257,000-256,300)*$15 = 10,500U
Cost effect of productivity for fixed cost = (Actual units of capacity in 2017 - Actual units of capacity in 2016 to
=(4,450-4,700)* $380 = 95,000F
Change in operating income due to productivity is $10,500U+ $95,000F =$84,500F
 (Actual units sold in 2017 - Actual units sold in 2016)*SP in 2016

016 output)*Input price in 2016

(SP in 2017 - SP in 2016)* Actual units sold in 2017

$ 233,000 F

(Input price in 2017 - input price in 2016)* Units of input required to produce 2017 output in 2016
= ($15-$17)* 256,300 = $512,600F
acity in 2016 to produce 2017 output

7 output - Units of iput required to produce 2017 output in 2016)* Input price in 2017

of capacity in 2016 to produce 2017 output)* Price per unit of capacity in 2017