Chat with AIExam 13: Strategy, Balanced Scorecard, and Profitability Analysis
Ranger Electronics Ltd. manufactures a variety of high quality electronic components. Data from the last three months are presented below:
You are the new assistant controller for Ranger and the controller has asked you to review the performance over the last 3 months and write a summary analysis with your recommendations for follow up or further monitoring. In addition, the controller notes that the company, although it has many detailed performance measures, is considering implementing a balanced scorecard and asks you to identify the measures you think would be most appropriate to include in the balanced scorecard.
Required:
Evaluate the performance of Ranger Electronics over the 3 month period.
You are the new assistant controller for Ranger and the controller has asked you to review the performance over the last 3 months and write a summary analysis with your recommendations for follow up or further monitoring. In addition, the controller notes that the company, although it has many detailed performance measures, is considering implementing a balanced scorecard and asks you to identify the measures you think would be most appropriate to include in the balanced scorecard.
Required:
Evaluate the performance of Ranger Electronics over the 3 month period.
(39) 
VerifiedNote responses may be in short formal report or memo format. This is an open ended question and student responses will vary. Instructors may wish to add details to guide students more in their analysis (for example, instructors may wish to advise students that the product mix remained constant over the 3 month period).
Productivity Considerations:
The plant's throughput time has improved from 12 hours to 11.5 hours. Setup time has also dropped from an average of 6.9 hours to 6.8 hours. This might indicate that the efficiency of the actual processing of products has improved, or it might indicate a different product mix in production with different average throughput time. Different types of production runs may necessitate different types of setups. If the product mix is constant, then this is an indicator of efficiency. Overtime hours have decreased which may be a result of overall volume of demand decreasing, or perhaps less urgency of demand (better planning? customer expectations for delivery?). The DM partial productivity has improved as the ratio of outputs produced to inputs used has increased. Downtime is down which may indicate efficient production scheduling, but could also be an indicator of product mix and customer demand.
Quality Considerations:
The company is performing well with respect to quality. The defect rate is down and the number of products returned has declined. In addition, machine breakdowns have declined. Downtime is down, this may be related to the lower breakdowns. Since the company is a manufacturer of high quality products, the quality dimension is important.
Customer Considerations:
On time delivery is high at 98+%. It improved in May but fell back to April's level in June. Additional information would be useful to determine whether the 98% level is competitive for the industry. Again, the defect rate is down and the number of products returned has declined. However, we do not have information on total volumes of product sold, so it is not clear if the return RATE has changed.
Financial Considerations:
We do not have specific information on the financial dimensions of performance. However, high DM productivity, lower overtime, lower defects, lower returns, lower setup hours, lower throughput time, lower downtime and lower breakdowns are all indicators of improvements which would suggest favourable efficiency variances. We do not know the prices of the inputs though.
Recommendations:
Investigate causes for overtime. Although the hours are declining, overtime increases unit costs due to overtime premiums for labour. Is the overtime a result of heavy demand, poor production scheduling, shortage of raw materials? Is the on-time delivery rate consistent with industry expectations? Why was it higher in May and can this be replicated?
Since the company is a manufacturer of high quality components, can the reporting be extended to include more aspects of quality reporting (prevention, appraisal, internal and external failure)?
Balanced Scorecard Considerations:
The important points for students to note are:
1. BSC should be linked to the company's mission. Since we do not have the mission statement, we are limited in our analysis; however, the quality dimension is important. Therefore of returns would be an important measure. On time delivery may be important to customers, but perhaps there are other aspects of quality that are more important (service?). In the internal business processes dimension, defect rate is a measure directly linked to the quality dimension. There are quite a few productivity and measures that relate to the internal business processes. The company should select the ones that best link to its mission. As noted, financial measures are missing; cost of quality measures may be added. Learning and growth measures are also missing. Innovation measures ( of new products) likely link well to mission of quality.
2. The number of measures should be limited. While, for example, there are many internal business processes measures, not all of these measures should be elevated to the strategic level.
3. BSC should include several dimensions. Traditionally the four dimensions are Customer, Financial, Internal Business Processes and Learning & Growth. The performance measurement, for strategic BSC, needs to be broader.
Ralph Company has been very aggressive in developing various types of financial and nonfinancial measurement schemes to help with the evaluation of its manufacturing processes. It appears that some of the managers are suboptimizing in that their decision processes are geared solely for their department's benefit, sometimes to the detriment of the organization as a whole.
Required:
What changes in the evaluation system could the company implement to help minimize the suboptimization of the managers' decision-making process?
(40) VerifiedThe company could implement a total factor productivity concept. Its major advantage is that it measures the combined productivity of all inputs to produce outputs and, therefore, explicitly evaluates substitution among inputs. For example, if buying a cheap material makes the cost of materials look favourable but causes more labour-hours, therefore causing labour costs to be unfavourable, suboptimization may be occurring. The total factor productivity takes into account both the materials costs and the labour costs and if they offset each other, that is fine, but if they do not offset, then the variance will be so noted.
Use the information below to answer the following question(s).
Following a strategy of product differentiation, Despotovich Corporation makes a high-end Computer Monitor, CM12. Despotovich Corporation presents the following data for the years 1 and 2:
Despotovich Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM12 in Year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of CM12 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Despotovich Corporation has 46 customers in Year 1 and 50 customers in Year 2 . The industry market size for high-end computer monitors increased 5% from Year 1 to Year 2. Of the $40 increase in unit selling price, $10 was attributable to a general increase in prices.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2?
Despotovich Corporation produces no defective units but it wants to reduce direct materials usage per unit of CM12 in Year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of CM12 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Despotovich Corporation has 46 customers in Year 1 and 50 customers in Year 2 . The industry market size for high-end computer monitors increased 5% from Year 1 to Year 2. Of the $40 increase in unit selling price, $10 was attributable to a general increase in prices.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2? (37) Verifieda. ($400 × 5,000) - (($40 × 15,000) + ($50 × 10,000) + ($3,000 × 60)) = $720,000
b. ($440 × 5,500) - (($44 × 15,375) + ($55 × 10,000) + ($3,125 × 58)) = $1,012,250
c. $1,012,250 - $720,000 = $292,250 (F)
Use the information below to answer the following question(s).
Following a strategy of product differentiation, Luke Company makes a high-end Appliance, AP15. Luke Company presents the following data for the years 1 and 2.
Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Luke Company has 46 customers in year 1 and 50 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Luke Company's operating income in Year 2?
Luke Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Luke Company has 46 customers in year 1 and 50 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Luke Company's operating income in Year 2? (40) Match each of the following balanced scorecard measures with the appropriate perspective.
-manufacturing cycle time
(39) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Ernsting Ltd. makes high quality electronic components. Ernsting Ltd. presents the following data for the past two years relating to its XJ649 product.
Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 . Manufacturing conversion costs in each year depend on production capacity defined in terms of units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase.
-Required:
a. What amount is the revenue effect of the growth component?
b. What amount is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component?
Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 . Manufacturing conversion costs in each year depend on production capacity defined in terms of units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase.
-Required:
a. What amount is the revenue effect of the growth component?
b. What amount is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component? (40) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Instruments Inc. makes a hand held calculator, II400. Instruments Inc. presents the following data for the years 1 and 2:
Instruments Inc. produces no defective units but it wants to reduce direct materials usage per unit of II400 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II400 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Instruments Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $4 increase in unit selling price, $1 is due to a general increase in prices.
-Required:
a. What is the net effect on operating income as a result of the productivity component?
Instruments Inc. produces no defective units but it wants to reduce direct materials usage per unit of II400 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II400 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Instruments Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $4 increase in unit selling price, $1 is due to a general increase in prices.
-Required:
a. What is the net effect on operating income as a result of the productivity component? (32) Granger Electronics Ltd. manufactures a variety of high quality electronic components. Data from the last three months are presented below:
You are the new assistant controller for Granger and the controller has asked you to review the performance over the last 3 months and write a summary analysis with your recommendations for follow up or further monitoring. In addition, the controller notes that the company, although it has many detailed performance measures, is considering implementing a balanced scorecard and asks you to identify the measures you think would be most appropriate to include in the balanced scorecard.
Required:
Evaluate the performance of Granger Electronics over the 3 month period.
You are the new assistant controller for Granger and the controller has asked you to review the performance over the last 3 months and write a summary analysis with your recommendations for follow up or further monitoring. In addition, the controller notes that the company, although it has many detailed performance measures, is considering implementing a balanced scorecard and asks you to identify the measures you think would be most appropriate to include in the balanced scorecard.
Required:
Evaluate the performance of Granger Electronics over the 3 month period. (35) Which of the following BEST describes the effect of uncertainty?
(33) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Ernsting Ltd. makes high quality electronic components. Ernsting Ltd. presents the following data for the past two years relating to its XJ649 product.
Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 . Manufacturing conversion costs in each year depend on production capacity defined in terms of units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2?
Ernsting produces no defective units but it wants to reduce direct materials usage per unit in Year 2 . Manufacturing conversion costs in each year depend on production capacity defined in terms of units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs nor customer-service costs are affected by changes in actual volume. Ernsting has 60 customers in Year 1 and 66 customers in Year 2. The industry market size for the product increased 6% from Year 1 to Year 2. Of the $50 increase in unit selling price, $30 is attributable to a general price increase.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2? (44) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Electronics Inc. makes a hand held calculator, II300. Electronics Inc. presents the following data for the years 1 and 2:
Electronics Inc. produces no defective units but it wants to reduce direct materials usage per unit of II300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Electronics Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $6 increase in unit selling price, $2 is due to a general increase in prices.
-Required:
a. What is the net effect on operating income as a result of the productivity component?
Electronics Inc. produces no defective units but it wants to reduce direct materials usage per unit of II300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Electronics Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $6 increase in unit selling price, $2 is due to a general increase in prices.
-Required:
a. What is the net effect on operating income as a result of the productivity component? (32) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Electronics Inc. makes a hand held calculator, II300. Electronics Inc. presents the following data for the years 1 and 2:
Electronics Inc. produces no defective units but it wants to reduce direct materials usage per unit of II300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Electronics Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $6 increase in unit selling price, $2 is due to a general increase in prices.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2?
Electronics Inc. produces no defective units but it wants to reduce direct materials usage per unit of II300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of II300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Electronics Inc. has 23 customers in year 1 and 25 customers in year 2. The industry market size for hand held calculators increased 5% from year 1 to year 2. Of the $6 increase in unit selling price, $2 is due to a general increase in prices.
-Required:
a. What is the operating income for Year 1?
b. What is the operating income in Year 2?
c. What is the change in operating income from Year 1 to Year 2? (28) Which of the following statements about productivity measures is TRUE?
(44) Match each of the following balanced scorecard measures with the appropriate perspective.
-information system availability
(38) Match each of the following balanced scorecard measures with the appropriate perspective.
-employee training hours
(43) Power Company has been unhappy with the financial accounting variances that its cost accounting system has been producing, because its managers believe that there is more to evaluating an operation than just examining accounting numbers. Therefore, it has started gathering data to assist in the examination of nonfinancial results of operations. The following information relates to the manufacture of remote control units for televisions, radios, and stereo components.
? 
Required:
a. What is the partial productivity of direct materials for each year?
b. What is the partial productivity of direct manufacturing labour for each year?
c. Did each area improve between year 1 and year 2? Explain.
d. What will be the projected direct material and labour needs for year 3 if remote control units increase by 6,000 units, assuming Power Company applies the constant returns to scale technology?
Required:
a. What is the partial productivity of direct materials for each year?
b. What is the partial productivity of direct manufacturing labour for each year?
c. Did each area improve between year 1 and year 2? Explain.
d. What will be the projected direct material and labour needs for year 3 if remote control units increase by 6,000 units, assuming Power Company applies the constant returns to scale technology? (42) Match each of the following balanced scorecard measures with the appropriate perspective.
-return on investment
(43) Electronics Inc. has been unhappy with the financial accounting variances that its cost accounting system has been producing, because its managers believe that there is more to evaluating an operation than just examining accounting numbers. Therefore, it has started gathering data to assist in the examination of nonfinancial results of operations. The following information relates to the manufacturing of remote control units for televisions, radios, and stereo components:
Required:
a. What is the partial productivity of direct materials for each year?
b. What is the partial productivity of direct manufacturing labour for each year?
c. Did each area improve between year 1 and year 2? Explain.
d. What will be the projected direct material and labour needs for year 3 if remote control units increase by 3,000 units, assuming Electronics, Inc. applies the constant returns to scale technology?
Required:
a. What is the partial productivity of direct materials for each year?
b. What is the partial productivity of direct manufacturing labour for each year?
c. Did each area improve between year 1 and year 2? Explain.
d. What will be the projected direct material and labour needs for year 3 if remote control units increase by 3,000 units, assuming Electronics, Inc. applies the constant returns to scale technology? (36) Maloney Corporation manufactures plastic water bottles. It plans to grow by producing high-quality water bottles at a low cost that are delivered in a timely manner. There are a number of other manufacturers who produce similar water bottles. Maloney believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.
Required:
a. Is Maloney's strategy one of product differentiation or cost leadership? Explain briefly.
b. Identify at least one key measure for each balanced scorecard perspective.
(37) Use the information below to answer the following question(s).
Following a strategy of product differentiation, Barry Company makes an XX 300. Barry Company presents the following data for the years 1 and 2.
Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Barry Company has 23 customers in year 1 and 25 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Barry Company's operating income for year 1?
Barry Company produces no defective units but it wants to reduce direct materials usage per unit of XX 300 in year 2. Manufacturing conversion costs in each year depend on production capacity defined in terms of XX 300 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Neither conversion costs or customer-service costs are affected by changes in actual volume. Barry Company has 23 customers in year 1 and 25 customers in year 2. The industry market size for high-end appliances increased 5% from year 1 to year 2.
-What is the Barry Company's operating income for year 1? (34) 
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