Q1 Caillie Building Services has been in business for two years. As it is a relatively new firm in a competitive market it is trying to deliver quality services at a low cost. Caillie presents the following data for 2020 and 2021. 2020 2021 1. Number of jobs billed 40 50 2. Selling price per job $32,000 $30,000 3. Builder labour hours 24,000 27,000 4. Cost per builder labour hour $35 $36 5. Builder support capacity (number of jobs the firm can do) 60 60 6. Total cost of labourer support $168,000 $180,000 7. Labourer support capacity cost per job $2,800 $3,000 Builder labour hour costs are variable costs. Labourer support costs are dependent on the Labourer capacity Caillie chooses each year (that is the number of jobs the firm can do each year). Labourer support costs do not change with the actual number of jobs each year. Required: (a) Is Caillie's strategy one of product differentiation or cost leadership? Explain briefly. (b) Calculate the growth, price recovery and productivity components that explain the changes in operating income from 2020 to 2021. (c) What do these components indicate in relation to the company's strategy? (d) Describe two key measures for Caillie to include in two of the four categories of the Balanced Scorecard (total of four measures). The measures should be specific to Caillie's strategic objectives and not general measures.
Q1
Caillie Building Services has been in business for two years. As it is a relatively new firm in a competitive market it is trying to deliver quality services at a low cost. Caillie presents the following data for 2020 and 2021.
|
|
2020 |
2021 |
|
1. Number of jobs billed |
40 |
50 |
|
2. Selling price per job |
$32,000 |
$30,000 |
|
3. Builder labour hours |
24,000 |
27,000 |
|
4. Cost per builder labour hour |
$35 |
$36 |
|
5. Builder support capacity (number of jobs the firm can do) |
60 |
60 |
|
6. Total cost of labourer support |
$168,000 |
$180,000 |
|
7. Labourer support capacity cost per job |
$2,800 |
$3,000 |
Builder labour hour costs are variable costs. Labourer support costs are dependent on the Labourer capacity Caillie chooses each year (that is the number of jobs the firm can do each year). Labourer support costs do not change with the actual number of jobs each year.
Required:
(a) Is Caillie's strategy one of product differentiation or cost leadership? Explain briefly.
(b) Calculate the growth, price recovery and productivity components that explain the changes in operating income from 2020 to 2021.
(c) What do these components indicate in relation to the company's strategy?
(d) Describe two key measures for Caillie to include in two of the four categories of the Balanced Scorecard (total of four measures). The measures should be specific to Caillie's strategic objectives and not general measures.
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