Refer to Exercise 13-22.

Required
1. Calculate the operating income of Stanmore Corporation in 2010 and 2011.
2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2010 to 2011.
3. Comment on your answer in requirement 2. What do these components indicate?

Data From Exercise 13-22:

Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2011 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2010 and 2011.

                                

Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2011. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2010 and 80 customers in 2011.

Required
1. Is Stanmore’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key measures that you would include in Stanmore’s balanced scorecard and the reasons for doing so.