Building a Balanced Scorecard
Lost Peak ski resort was for many years a small, family-owned resort serving day skiers from nearby towns. Lost Peat was recently acquired by Western Resorts, a major ski resort operator. The new owners have plans to upgrade the resort into a destination resort for vacationers. As part of this plan, the new owners would like to make major improvements in the Powder S Lodge, the resort's on-the-hill cafeteria. The menu at the lodge is very limited—hamburgers, hot dogs: chili, tuna fish sandwiches, pizzas, French fries, and packaged snacks. With little competition, the previous owners of the resort felt no urgency to upgrade the food service at the lodge. If skiers want lunch on the mountain, the only alternatives are the Powder S Lodge or a brown bag lunch brought from home.
As part of the deal when acquiring Lost Peak: Western Resorts agreed to retain all of the current employees of the resort. The manager of the lodge, while hardworking and enthusiastic, has very little experience in the restaurant business. The manager is responsible for selecting the menu, finding and training employees, and overseeing daily operations. The kitchen staff prepare food and wash dishes. The dining room staff take orders, serve as cashiers, and clean the dining room area.
Shortly after taking over Lost Peak, management of Western Resorts held a day-long meeting with all of the employees of the Powder S Lodge to discuss the future of the ski resort and the new management's plans for the lodge. At the end of this meeting, management and lodge employees created a balanced scorecard for the lodge that would help guide operations for the coming ski season. Almost everyone who participated in the meeting seemed to be enthusiastic about the scorecard and management's plans for the lodge.
The following performance measures were included on the balanced scorecard for the Powder S Lodge:
a. Weekly Powder 8 Lodge sales
b. Weekly Powder 8 Lodge profit
c. Number of menu items
d. Dining area cleanliness as rated by a representative from Western Resorts management
e. Customer satisfaction with, menu choices as measured by customer surveys
f. Customer satisfaction with, service as measured by customer surveys g. Average time to take an order
h. Average time to prepare an order
1. Percentage of kitchen staff completing a basic cooking course at the local community college j. Percentage of dining room staff completing a basic hospitality7 course at the local community7 college
Western Resorts will pay for the costs of staff attending courses at the local community college.
Required:
1. Using the above performance measures, construct a balanced scorecard for the Powder 8 Lodge. Use Exhibit 10-5 as a guide. Use arrows to show causal links and indicate with a + or - whether the performance measure should increase or decrease.
2. What hypotheses are built into the balanced scorecard for the Powder 8 Lodge? Which of mese hyponeses do you believe are most questionable? Why?
3. How will management know if one of the hypotheses underlying the balanced scorecard is false?
Want to see the full answer?
Check out a sample textbook solutionChapter 10 Solutions
Introduction To Managerial Accounting
- A country club wants to exam the effects of a new marketing campaign that attempts to get more people within the community to become members. In many communities, when people buy a house in the area, they receive a “Welcome Wagon” gift basket containing coupons to local restaurants. The idea of the marketing campaign is to include a free two month membership to the country club in the gift basket with the hope that once “new” residents try the country club then at least a certain proportion will want to become real members. One member of the Club’s Executive Council believes that at least 81% of the people who receive the coupons for the free membership will use the coupon. In a sample of 192 new residents who received the coupon for the two month free membership, there were 138 people who actually took advantage of the free two month membership. When testing the hypothesis that at least 81% of the people that receive the coupon actually use it, what is the test statistic?arrow_forwardThe Vintage Restaurant, on Captiva Island near Fort Myers, Florida, is owned and operated by Karen Payne. The restaurant just completed its third year of operation. During those three years, Karen sought to establish a reputation for the restaurant as a high-quality dining establishment that specializes in fresh seafood. Through the efforts of Karen and her staff, her restaurant has become one of the best and fastest-growing restaurants on the island. To better plan for future growth of the restaurant, Karen needs to develop a system that will enable her to forecast food and beverage sales by month for up to one year in advance. The following table shows the value of food and beverage sales (1,000s) for the first three years of operation: Managerial Report Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that summarizes your findings, forecasts, and recommendations. Include the following: 1. A time series plot. Comment on the underlying pattern in the time series. 2. Using the dummy variable approach, forecast sales for January through December of the fourth year. How would you explain this model to Karen? Assume that January sales for the fourth year turn out to be 295,000. What was your forecast error? If this error is large, Karen may be puzzled about the difference between your forecast and the actual sales value. What can you do to resolve her uncertainty about the forecasting procedure?arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel’s guests, maintaining an 80% occupancy rate, improving the average rate received per room to $101 from the current $96, achieving a savings of 5% on all hotel costs, and reducing energy use by 10% by carefully managing the use of heating and air conditioning in unused rooms and by carefully managing the onsite laundry facility, among other means. The hotel’s owner, a partnership of seven people who own several hotels in the region, wants to structure Kristin’s future compensation to objectively reward her for achieving these goals. In the past, she has been paid an annual salary of $85,000 with no incentive pay. The incentive plan the partners developed has each of the goals weighted as follows:…arrow_forward
- • Other financial information as of October 31, 2023: Cash in checking account, $7,000. Petty cash, $300. Outstanding mortgage balance, $352,000. Accounts payable arising from invoices for supplies and utilities that are unpaid as of October 31, 2023, and due in November 2023, $4,500. • No other unpaid bills existed on October 31, 2023. • The club purchased $25,000 worth of exercise equipment during the current fiscal year. Cash of $10,000 was paid on delivery, with the balance due on October 1. This amount had not been paid as of October 31, 2023. An additional $25,00 (cash) of equipment purchases is planned for the coming year. • The club began operations in 2022 in rental quarters. In October 2022, it purchased its current property (land and building) for $600,000, paying $120,000 down and agreeing to pay $32,000 plus 9% interest annually on the unpaid loan balance each November 1, starting November 1, 2023. • Membership rose 3% in 2023. The club has experienced approximately this…arrow_forwardGrow It All Farms Ltd. is an agri-business that grows a variety of different grains on the land that it owns. Operations have been steadily expanding over the last few years. The company has now reached a point where it needs to create a reservoir for irrigation purposes. Management has applied to the municipality for permission to create the reservoir by creating a diversion from a creek that flows through land that the company owns. The permit has been approved on the condition that Grow It All Farms restore the land and creek to its natural state when operations cease. The company is required to provide the municipality with financial statements on an annual basis. Management agreed to the condition and has engaged an engineering firm to scope and price out the work. The cost to create the reservoir and divert the creek is $4,180,000. The cost of the restoration is estimated to be $6.180.000 in 20 years. Grow It All Farms borrows at an average rate of 6% from its lenders (a) Prepare…arrow_forwardCurrent Attempt in Progress Your answer is partially correct. Vaughn Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and related facilities. Purchase: The company can purchase the site, construct the building, and purchase all store fixtures. The cost would be $1,865,700. An immediate down payment of $415,500 is required, and the remaining $1,450,200 would be paid off over 5 years at $369,000 per year (including interest payments made at end of year). The property is expected to have a useful life of 12 years, and then it will be sold for $508,900. As the owner of the property, the company will have the following out-of-pocket expenses each period. Property taxes (to be paid at the end of each year) Insurance (to be paid at the beginning of each year) Other (primarily maintenance which…arrow_forward
- Family Resorts, Inc., is a holding company for several vacation hotels in the northeastern and mid-Atlantic states. The firm originally purchased several old inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable.Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting, and the managers accepted it. To evaluate…arrow_forwardFamily Resorts, Inc., is a holding company for several vacation hotels in the northeastern and Mid-Atlantic states. The firm originally purchased several old Inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the Inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable. Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting and the managers accepted it. To…arrow_forwardUse the following information to answer questions 1 to 5. A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak…arrow_forward
- Use the following information to answer questions 1 to 5. A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak…arrow_forwardSunny Nights Inc. is completely powered by the city power grid, but management is considering switching fuel sources in an effort to improve the publics perception of the companys corporate social responsibility. Within the next five years, management wants the company to be completely solar powered and to market this change through company advertising. Upon consulting with Sunny Nights, you have determined that an appropriate course of action is to include this CSR activity as a strategic objective on the companys current balanced scorecard. a. Determine the appropriate performance perspective for the CSR strategic objective. b. Suggest one possible performance metric for the objective. c. Determine an appropriate yearly performance target for the performance metric.arrow_forwardA local university decides to install motion detection light switches in the faculty offices. The cost savings associated with these switches is $1.44 per year for each year of a switch’s 15 year life. This gives a total cost savings of $21.60 per switch. The purchase cost of each light switch was $20. What should the university keep in mind about this decision to install motion-detection light switches in the faculty offices?arrow_forward
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub