Strategic analysis of operating income. a. Calculate the operating income of Compton Associates in 2016 and 2017.
b. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017.
c. Comment on your answer in requirement 2. What do these components indicate?

Strategy, balanced scorecard, service company. Compton Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm’s services is very competitive. To compete successfully, Compton must deliver quality services at a low cost. Compton presents the following data for 2016 and 2017.

2016 2017
1. Number of jobs billed 40 50
2. Selling price per job $32,000 $30,000
3. Architect labor-hours $24,000 $27,000
4. Cost per architect labor-hour $35 $36
5. Architect support capacity (number Of jobs the firm can do) 60 60
6. Total cost of software-implementation support $168,000 $180,000
7. Software-implementation support-capacity cost per job (row6 + row 5) $2,800 $3,000

Architect labor-hour costs are variable costs. Architect support costs for each year depend on the Architect support capacity that Compton chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year.

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

The unadjusted trial balance of the manufacturing equitable at december 31, 2018, the end of its fiscal year, included the following account balances. manufacturing’s 2018 financial statements were issued on april 1, 2019. accounts receivable $ 114,250 accounts payable 53,600 bank notes payable 670,000 mortgage note payable 1,270,000 other information: the bank notes, issued august 1, 2018, are due on july 31, 2019, and pay interest at a rate of 12%, payable at maturity. the mortgage note is due on march 1, 2019. interest at 11% has been paid up to december 31 (assume 11% is a realistic rate). manufacturing intended at december 31, 2018, to refinance the note on its due date with a new 10-year mortgage note. in fact, on march 1, manufacturing paid $263,000 in cash on the principal balance and refinanced the remaining $1,007,000. included in the accounts receivable balance at december 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $19,650. the accounts were of two major customers who were expected to order more merchandise from manufacturing and apply the overpayments to those future purchases. on november 1, 2018, manufacturing rented a portion of its factory to a tenant for $32,400 per year, payable in advance. the payment for the 12 months ended october 31, 2019, was received as required and was credited to rent revenue. required: (1) prepare any necessary adjusting journal entries at december 31, 2018, pertaining to each item of other information (2) prepare the current and long-term liability sections of the december 31, 2018, balance sheet. balance sheet (partial) at december 31, 2018 current liabilities: total current liabilities long-term liabilities: