PROBLEM 25.5B
a.
40 Minutes, Medium
SAVE SOME INCORPORATED
Any project with an ROI of 15% or better would be attractive to Jan and would improve
the ROI of Jan’s location. Thus, only project A would improve Jan’s ROI.
PROBLEM 25.6B
EATWELL
TO: Eatwell Corporate Management
FROM: Knowitall Incor
p
orated
RE: Balanced Scorecard Problems in the Eatwell Restaurant Chain
40 Minutes, Strong
The following problems have been observed in the Restaurants and recorded from our
MEMO
We suggest that you choose one or at most two measures for each category of the balanced
making an impact on the operations of the restaurant.
Finally, Ms. Olson has suggested that the time and effort involved in maintaining the
information system that must measure all of the balanced scorecard variables is very costly
and disruptive to the workflow in the restaurant.
importance of any of the activities being measured to achieve the strategic goals set up for
the department.
Some of the goals are in conflict with one another. Motivating employees to be more
efficient and productive can sometimes be in conflict with employee satisfaction measures.
Restaurant managers do not have control over all the inputs to the chosen measures. For
employee productivity can decline.
15 Minutes, Easy PROBLEM 25.7B
MANAGEMENT COMPENSATION
BRONSON CORPORATION
Base Salary:
Annual Incentives and Other Awards:
The base salary is primarily driven by labor market concerns. Making sure that the top
management is compensated in a range that is consistent with competitors of a similar size is
the primary motivation for establishing the fixed annual salary.
The general executive compensation policy mentions both short-term and long-term
orientation. The compensation program includes both a base salary and other annual incentive
bonuses:
20 Minutes, Medium PROBLEM 25.8B
FRANGLING INTERNATIONA
L
a.
Assuming sales revenue is not affected, then net income is higher due to lower advertising
expense. ROI increases and residual income increases. Capital turnover is not affected.
30 Minutes, Medium PROBLEM 25.9B
WARTHERS CORPORATION
1. a.
Average investment base = (beginning of year base + end of year base) ÷ 2. Beginning
of year × 1.06 (6% increase) = end of year = $11,220,000 = 1.06 × beg. year. Thus, beg.
SOLUTIONS TO CRITICAL THINKING CASE
S
CASE 25.1
BUSINESS PERFORMANCE
A
ND TRANSFER PRICE
S
b.
30 Minutes, Medium
a. ROI = 12% ($6,000,000 ÷ $50,000,000)
Residual Income = $1,000,000 [$6,000,000 – ($50,000,000 × 10%)]
Both statements are correct. Selling the printers for $300 each is more profitable than
selling them for $250. If the Printer Division had transferred an additional 10,000 XLC
c. The problem lies in using cost as a transfer price for the output of a profit center. If
market value were used as the transfer price, it would be as profitable for the Printer
Division to supply printers to Mail-Order as to sell them to outsiders. This should
eliminate the interdepartmental friction and allow Wolfe to benefit from selling XLC
printers at $300 instead of $250.
20 Minutes, Medium CASE 25.2
BIG BERTHA SUB SHOPS
a. ROI prior to and after menu change to include toasted subs:
1) Prior to Toasted Subs: Cleveland
Sales $880,400
ROI 15.65%
ROI 17.23%
ROI 15.93%
b.
1) Prior to Toasted Subs: Cleveland
2) Toasted Sub:
3) After Toasted Subs:
Operating Profit $174,464
Less 15% x assets ( 164,250)
Residual Income $10,214
Residual Income
CASE 25.3
STERN STEWART & COMPAN
Y
INTERNET
• Setting Orgnaizational Goals
• Performance Measurement
30 Minutes, Medium
EVA can be used for the following purposes
CASE 25.
4
TOOTSIE ROLL INDUSTRIES
INTERNET
a. Bonus as % of Salary in Most Current Year
(bonus divided b
y
salar
y
)
b.
40 Minutes, Strong
Chairman and CEO
Position Title
$1,383,000 ÷ $999,000 = 138.4%
$460,000 ÷ $999,000 = 46.0%Vice President of Marketing and Sales
The Company’s compensation program is designed to encourage and reward both
individual effort and teamwork leading to improvement in the Company’s financial