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EA9. 12.4 Classify each of the following performance measures into the balanced scorecard perspective to
which it relates: financial perspective, internal operations perspective, learning and growth perspective, or
customer perspective.
A. Number of improved products
B. Time from packaging to delivery or display
C. Production costs
D. Number of customer suggestions
E. Sales mix revenues
F. Number of repeat customers
B Exercise Set B
EB1. 12.1 For the following situations identify whether the description is a centralized or decentralized
organization.
A. the United States Navy
B. Farah’s Domino’s franchise store
C. Domino’s Pizza
D. Middie’s Furniture, which is divided into separate operating units, such as living room, kitchen, flooring
E. the local community college, which has a single payroll department, a single administrative
headquarters, and a single human resources department since it “flattened” its organization structure
F. Conner Corporation, which promotes managers from within the organization whenever possible and
which has formal training programs for lower-level managers
EB2. 12.1 For the following descriptions, state whether the cost is controllable or uncontrollable by
responsibility center managers.
A. advertising for a merchandiser
B. corporate income taxes
C. office supplies for a merchandiser
D. donations to the Salvation Army
E. insurance for delivery vehicles
EB3. 12.1 Identify the type of responsibility center (revenue center, cost center, profit center, or investment
center) for each of the following situations.
A. the legal department for Avon Manufacturing
B. the Macy’s store in Mansfield, Ohio
C. the food and beverage division of the Best Western
D. the marketing department of the Hershey Company
E. the Walmart #5030 on Central Avenue in Toledo, Ohio
F. Apple’s Braeburn Capital Inc., where most of Apple’s billions of dollars are invested
G. Zappo’s department store
H. the men’s clothing department in the Walmart #5030 in Toledo, Ohio
656 Chapter 12 Balanced Scorecard and Other Performance Measures
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EB4. 12.2 Padma completed her doctoral degree and has taken a position as an assistant professor at a
local university. She was given the following performance measures for her new position. Identify whether
these goals are long or short term.
A. Interact in a fair and impartial way with students.
B. Promote and access student academic achievement.
C. Counsel students within the norms of society and the regulations of the college.
D. Motivate students.
E. Effectively plan and organize lectures and labs in accordance with the college course outlines.
F. Report class attendance in accordance with the college policy and procedure.
G. Serve on academic committees as assigned.
H. Make progress toward tenure necessary at her university.
EB5. 12.3 During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of
$9,350,000 and average capital assets of $13,500,000. What is the sales margin?
EB6. 12.3 During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of
$9,350,000 and average capital assets of $13,500,000. Using the sales margin from the previous exercise, what
is the total ROI for the company during the current year?
EB7. 12.3 Assume Plainfield Manufacturing has debt of $6,500,000 with a cost of capital of 9.5% and equity
of $4,500,000 with a cost of capital of 11.5%. What is Tyler’s weighted average cost of capital?
EB8. 12.3 Though a high ROI is desired, what are some reasons that might lead to a low or decreased ROI?
EB9. 12.4 Classify each of the following performance measures into the balanced scorecard perspective to
which it relates: financial perspective, internal operations perspective, learning and growth perspective, or
customer perspective.
A. Employee satisfaction surveys
B. Units of waste per production process, uniformity of products and inventory control
C. Number of energy-efficient bulbs replaced
D. Management training course certificates awarded
E. Divisional profit
F. Number of customer referrals
Chapter 12 Balanced Scorecard and Other Performance Measures 657
Problem Set A
PA1. 12.1 Match each of the following with its appropriate term.
A. Controllable
factors
i. This is the part of an organization in which management is evaluated based on the
ability to contain costs; the manager primarily has control only over costs.
B. Cost center ii. This means to align the goals of the business with the personal goals of the
manager.
C. Metric iii. These components of the organization are components for which the manager is
responsible and can control.
D. Goal
congruence
iv. This is the means to measure something such as a goal or target.
E. Investment
center
v. This is a system that evaluates management in a way that will link the goals of the
corporation with those of the manager.
F. Performance
measurement
system
vi. For this center, management is responsible for revenues, costs, and assets and is
evaluated based on these three components.
PA2. 12.1 Florentino Allers is the production manager of Electronics Manufacturer. Due to limited capacity,
the company can only produce one of two possible products:
• An industrial motherboard with a 75% probability of making a profit of $1 million and a 25% probability
of making a profit of $150,000
• A regular motherboard with a 100% chance of making a profit of $710,000
Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the
two products and is more of a risk-taker, more so than most of the top management at Electronics
Manufacturer.
A. Which option is Florentino more likely to choose and why?
B. Which option would the company be more likely to choose and why?
C. What changes should the company make to Florentino’s compensation to avoid unnecessary risks?
PA3. 12.3 Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net
income of $40 million. Included in the income was interest expense of $2,800,000. The company’s tax rate was
40%. Total assets were $470 million, current liabilities were $104,000,000, and $72,000,000 of the current
liabilities are noninterest bearing. What are the invested capital and ROI for Macon?
PA4. 12.3 Jefferson Memorial Hospital is an investment center as a division of Hospitals United. During the
past year, Jefferson reported an after-tax income of $7 million. Total interest expense was $3,200,000, and the
hospital tax rate was 30%. Total assets totaled $70 million, and non-interest-bearing current liabilities were
$22,800,000. The required rate of return established by Jefferson is equal to 18% of invested capital. What is the
residual income of Jefferson Memorial Hospital?
658 Chapter 12 Balanced Scorecard and Other Performance Measures
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
PA5. 12.4 Crawford’s Books and Things has a traditional bookstore housed downtown Charlotte. The store
has been there forty years, and many customers love the fact that they can hold the books in their hands and
browse the offerings. Crawford’s just started an online book division for people who like to order books
online.
EVA for the Charlotte store is about $13 million, while EVA for the online division shows a value of –$2.2 million.
A. Explain why it might be better to evaluate the online division using a balanced scorecard.
B. Suggest two measures for the customer dimension that would be appropriate for the online division
and two measures for the internal processes dimension of the balanced scorecard that would be
appropriate for the online division.
PA6. 12.4 Coral Creations has strategic plans that call for rapid growth, a limited number of units for each
design to enhance exclusivity, designs for the perfect fit, on-time delivery to customers, retention of highly
trained employees with innovativeskills, and excellent inventory control.
A. Suggest one performance measure for each dimension of the balanced scorecard for Coral Creations.
B. Take one of your measures and discuss the linkage it has to multiple strategies in Coral’s plan.
B Problem Set B
PB1. 12.1 Match each of the following with its appropriate term:
A.
Performance
measures
i. The decisions and outcomes over which a manager does not have control
B. Profit
center
ii. That part of an organization in which management is evaluated based on the ability to
generate revenues; the manager primarily has control only over revenues
C.
Responsibility
accounting
iii. The part of an organization in which management is evaluated based on the ability to
generate profits because the manager has control over both revenues and costs
D. Revenue
center
iv. A broad vision of how a company will be in the future
E. Strategic
plan
v. A system that collects and reports data for which a manager has responsibility
F.
Uncontrollable
factors
vi. The metrics used to evaluate a specific attribute of a manager’s role
Chapter 12 Balanced Scorecard and Other Performance Measures 659
PB2. 12.1 Oleg Markov is the production manager of NASA Solvents. Due to limited capacity, the company
can only produce one of two possible products:
• an industrial concentrated solvent with a 15% probability of making a profit of $1 million and an 85%
probability of making a profit of $200,000
• a household diluted solvent with a 100% chance of making a profit of $310,000
Oleg will get a 20% bonus from his department. Oleg has the responsibility to choose between the two
products and is more risk averse than most of the top management at NASA Solvents.
A. Which option is Oleg more likely to choose and why?
B. Which option would the company be more likely to choose and why?
C. What changes should the company make to Oleg’s compensation to encourage managers to take
appropriate risks
PB3. 12.3 Evaluate the two departments for Moxie Products.
Compare the year’s performance of the two departments in terms of ROI and RI. Which department has
created the most wealth for Moxie shareholders in the past year?
PB4. 12.3 Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%.
Division A has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a
profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of
9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs
$5,000,000.
A. Calculate the EVA for each of Banyan’s divisions.
B. Calculate the RI for each of Banyan’s division.
C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much?
D. If Banyan uses RI, which division has the better project and by how much?
E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus
RI?
660 Chapter 12 Balanced Scorecard and Other Performance Measures
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
	Chapter 12. Balanced Scorecard and Other Performance Measures
	Exercise Set B
	Problem Set A
	Problem Set B