978-1118548639 Chapter 11 Part 3

Chapter 11 – Performance Evaluations Revisited: A Balanced Approach

11–19

Problem 11–18

Activity

a.

Manufacturing

time

b.

Value–added

time

Materials moved to production floor

25

–

Production in station 1

35

Materials moved to station 2

5

–

Wait to begin at station 2

8

–

Production in station 2

45

Inspection

3

–

Materials moved to finished goods

inventory

6

–

Total

127

80

c.

63=

127

80

=Efficiency Cycle ingManufactur

rearranging workstations could eliminate considerable non-value-

added time.

The next area for managers to review is the wait between stations 1

The final area to review is inspection. The number of defective items

Solutions for Davis & Davis, Managerial Accounting, 2nd ed.

11–20

SOLUTIONS TO C&C CONTINUING CASE

Case 11-19

Based on the balanced scorecard results, it appears that providing

increased cost, along with the increased time between payments for

raw materials inventory purchases and eventual cash collection from

Over the long run, it is likely in C&C Sports’ best interest to rely more

on full-time employment rather than highly seasonal employment

the company.

Chapter 11 – Performance Evaluations Revisited: A Balanced Approach

11–21

SOLUTIONS TO CASE

Case 11-20

a.

Case 11-20, continued

b.

Perspective

Measures

Lead/Lag

Fin/Nonfin.

Financial

 Number of new products

developed

 Percentage of sales by product

category

 Time to double sales revenue

Leading

Lagging

Nonfinancial

 Return on equity

 Earnings per share

 Stock price that exceeds $30

Lagging

Financial

Customer

 Number of new accounts

 Number of retained accounts

 Increased domestic and foreign

sales

Leading

Lagging

Nonfinancial

Financial

 Number of brands that are

marketplace leaders

 Number of new “icon brands”

acquired

 Fair pricing (price relative to

competitors’ prices)

Leading

Nonfinancial

Internal

business

processes

 Defect rate

 Sales growth

Leading

Lagging

Nonfinancial

 Establish inventory turnover

measures

 Number of new products under

development

 Number of continuous

improvement projects

 Capital budget maintained at

4.7% of sales

Lagging

Leading

Lagging

Nonfinancial

Financial

Learning

and growth

 Number of appropriate hires

 Employee turnover rate

 Absenteeism rate

 Training and development cost

Leading

Lagging

Leading

Nonfinancial

Financial

Chapter 11 – Performance Evaluations Revisited: A Balanced Approach

11–23

Case 11-20, continued

MetroMed’s managers have developed a balanced scorecard using a

measures which only report outcomes.

The scorecard contains 16 nonfinancial measures and only 6

training, for example, and while important, it doesn’t help achieve the

objective. A more specific measure is “dollars spent on company

mission and values training.”

that the company needs?

“Employee turnover rate,” while desirably low, is not as specific as

“Absenteeism rate,” like “appropriate hires” doesn’t get at the

objective of being a values-driven company.

11–24

Case 11-20, continued

Internal business processes: The two objectives of product quality

of quality is “warranty claims.”

“Sales growth” has little to do with internal business processes.

With the combination of quality and innovation, managers should be

motivated to design quality products that get to market quickly.

The other measures, “establish inventory turnover measures,”

“Fair pricing,” while important, is not specific or relevant to the

company’s brand image objective.

Chapter 11 – Performance Evaluations Revisited: A Balanced Approach

11–25

Case 11-20, continued

then market share could decrease.

Financial: The objective “achieve strong, balanced growth” tends to

the Dow Jones Industrial Average and market price” would better

capture the value created by the company apart from changes in the

shareholders.