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1. Explain four perspectives of Balance Score Cards. Why Balance Score Card is important in the...

1. Explain four perspectives of Balance Score Cards. Why Balance Score Card is important in the business?

E23-3 Kimm Company has gathered the following information about its product. Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5 per pound, but Kimm always takes the 2% cash discount all of its suppliers offer. Freight costs average $0.25 per pound. Direct labor. Each unit requires 2 hours of labor. Setup, cleanup, and downtime average 0.3 hours per unit. The average hourly pay rate of Kimm’s employees is $12. Payroll taxes and fringe benefits are an additional $3 per hour. Manufacturing overhead. Overhead is applied at a rate of $7 per direct labor hour. Instructions: Compute Kimm’s total standard cost per unit.

E23-13 Wales Company purchased (at a cost of $10,800) and used 2,400 pounds of materials during May. Wales’s standard cost of materials per unit produced is based on 2 pounds per unit at a cost $5 per pound. Production in May was 1,070 units. Instructions: (a) Compute the total, price, and quantity variances for materials. (b) Assume Wales also had an unfavorable labor quantity variance. What is a possible scenario that would provide one cause for the variances computed in (a) and the unfavorable labor quantity variance?

E24-6 BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Instructions (a) Determine the cash payback period. (b) Determine the approximate internal rate of return. (c) Assuming the company has a required rate of return of 10%, state your conclusion on whether the new machine should be purchased.

E24-10 Vilas Company is considering a capital investment of $190,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,000 and $50,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment. Instructions (Round to two decimals.) (a) Compute (1) the cash payback period and (2) the annual rate of return on the proposed capital expenditure. (b) Using the discounted cash fl ow technique, compute the net present value.

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Answer #1

The four perspective are:

The Financial perspective

For most for-profit organisations, money comes up tops. (We’ll get to non-profits later in the article.) Therefore, the very top perspective is all about financial objectives.

Essentially, any key objective that is related to the company’s financial health and performance may be included in this perspective.Other financial objectives might include:

  • Cost savings and efficiencies (for example, a specific goal to reduce production costs by 10% by 2020)
  • Profit Margins (increasing operating profit margins, for instance)
  • Revenue sources (for example, adding new revenue channels)

The Customer perspective

This perspective focuses on performance objectives that are related to customers and the market.

Included in this perspective you might find objectives for:

  • Customer service and satisfaction (increasing net promoter scores, or reducing call centre waiting times, for example)
  • Market share (such as, growing market share in a certain segment or country)
  • Brand awareness (for example, increasing interactions on social media)

The Internal Process perspective

What processes do you need to put in place to deliver your customer- and finance-related objectives? That’s the question this perspective aims to answer. Here you would set out any internal operational goals and objectives – or, in other words, what does the business need to have in place and what does the business need to do well in order to drive performance?

Examples of internal process objectives might include:

  • Process improvements (for example, streamlining an internal approval process)
  • Quality optimisation (such as, reducing manufacturing waste)
  • Capacity utilisation (using technology to boost efficiency, for instance)

The Learning and Growth perspective

While the third perspective is about the concrete process side of things, this final perspective considers the more intangible drivers of performance. Because it covers such a broad spectrum, this perspective is often broken down into the following components:

  • Human capital – skills, talent and knowledge (for example, skills assessments, performance management scores, training effectiveness)
  • Information capital – databases, information systems, networks and technology infrastructure (such as, safety systems, data protection systems, infrastructure investments)
  • Organisational capital – culture, leadership, employee alignment, teamwork and knowledge management (for example, staff engagement, employee net promoter score, corporate culture audits)

Importance of balance scorecard

The balanced scorecard goals help managers make better allocation and prioritizing decisions, enabling them to see exactly which initiatives are necessary for meeting organizational goals. The fourth aspect of balanced scorecard incorporates reviews and feedback from customers, internal processes, and growth

3 Total Standard cost pee unit, Material = (4.5+005) X5 X0098 + 0-25% (4.510-S 2 24.5+125= 25.75 Labor= (2+0.3x12+ 3x(2+0.3)

* Rest two questions are related to finance hence not answered.

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