Northland Corporation is a small information-systems consulting firm that specializes in helping companies implement standard sales-management software.
Question:
Northland Corporation is a small information-systems consulting firm that specializes in helping companies implement standard sales-management software. The market for Northalnds’s services is very competitive. To compete successfully, Northland must deliver quality service at a low cost. Northland presents the following data for 2011 and 2012.
| | 2011 | 2012 |
| Number of jobs billed | 40 | 55 |
| Selling price per job | $45,000 | $42,000 |
| Software-implementation labor-hours | 25,000 | 28,000 |
| Cost per software-implementation labor hour | $58 | $60 |
| Software-implementation support capacity (number of jobs it can do) | 70 | 70 |
| Total cost of software-implementation support | $224,000 | $252,000 |
| Software-implementation support-capacity cost per job | $3,200 | $3,600 |
Software-implementation labor-hour costs are variable costs. Software-implementation support costs for each year depend on the software-implementation support capacity Northland Chooses to maintain each year (that is, the number of jobs it can do each year). Software-implementation support costs do not vary with the actual number of jobs done that year.
a) Is Northland Corporation’s strategy one of product differentiation or cost leadership? Explain Briefly?
b) Describe key measures you would include in Northland’s balanced scorecard and your reasons for doing so.
c) Calculate the operating income of Northland Corporation in 2011 and 2012
d) Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2011 to 2012.
e) Comment on your answer in requirement d. What do these components indicate?
f) Calculate the amount and cost of unused software-implementation support capacity at the beginning of 2012, based on the number of jobs actually done in 2012.
g) Suppose Northland can add or reduce its software-implementation support capacity in increments of 10 units. What is the maximum amount of costs that Northland could save in 2012 by downsizing software implementation support capacity?
h) Northland, in fact, does not eliminate any of its unused software-implementation support capacity. Why might Northland not downsize?
Expert Answer:
A Product differenciation is making a product more attractive Cost leadership is making with the low... View the full answer
Managerial Accounting Decision Making and Motivating Performance
ISBN: 978-0137024872
1st edition
Authors: Srikant M. Datar, Madhav V. Rajan
