Creating a Balanced Scorecard Ariel Tax Services prepares tax returns for individual and corporate clients. As the company has gradually expanded to 10 offices, the founder Max Jacobs has begun to feel as though he is losing control of operations. In response to this concern, he has decided to implement a performance measurement system that will help control current operations and facilitate his plans of expanding to 20 offices. Jacobs describes the keys to the success of his business as follows: "Our only real asset is our people. We must keep our employees highly motivated and we must hire the 'cream of the crop/ Interestingly, employee morale and recruiting success are both driven by the same two factors—compensation and career advancement. In other words, providing superior compensation relative to the industry average coupled with fast-track career advancement opportunities keeps morale high and makes us a very attractive place to wort. It drives a high rate of job offer acceptances relative to job offers tendered." "'Hiring highly qualified people and keeping them energized ensures operational success, which in our business is a function of productivity, efficiency. and effectiveness. Productivity" boils down to employees being billable rather than idle. Efficiency relates to the time required to complete a tax return. Finally, effectiveness is critical to our business in the sense that we cannot tolerate errors. Completing a tax return quickly is meaningless if the return contains errors." "Our growth depends on acquiring new customers through word-of-mouth from satisfied repeat customers. We believe that our customers come back year after year because they value error-free : timely, and courteous tax return preparation. Common courtesy is an important aspect of our business We call it service quality, and it all ties back to employee morale in the sense that happy employees treat their clients with care and concern." "While sales growth is obviously important to our future plans, growth without a corresponding increase in profitability is useless. Therefore, we understand that increasing our profit margin is a function of cost-efficiency as well as sales growth. Given that payroll is our biggest expense, we must maintain an optimal balance between staffing levels and the revenue being generated. As I alluded to earlier, the key to maintaining this balance is employee productivity". If we can achieve cost-efficient sales growth, we should eventually have 20 profitable offices!" Required: 1. Create a balanced scorecard for Ariel Tax Services. Lint your scorecard measures using the framework from Exhibit 10—5. Indicate whether each measure is expected to increase or decrease. Feel free to create measures that may not be specifically mentioned in the chapter, but make sense given the strategic goals of the company. 2. What hypotheses are built into the balanced scorecard for Ariel Tax Services? Which of these hypotheses do you believe are most questionable and why? 3. Discuss the potential advantages and disadvantages of implementing an internal business process measure called total dollar amount of tax refunds generated. Would you recommend using this measure in Ariel's balanced scorecard? 4. Would it be beneficial to attempt to measure each office's individual performance with respect to the scorecard measures that you created? Why or why not?

Young Manufacturing Company is a startup manufacturing firm looking to build and develop its balanced scorecard. Gunner Young, the company owner, has told you the following: Our company was built on the shoulders of our hard-working, diligent employees. I believe that the heart and soul of any company is its employees. If our company is going to succeed, we need to continue to hire and train hard-working, passionate, and ethical employees. I also believe in being efficient. Ive noticed that the companies that always find ways to cut production costs and produce their goods faster are the ones that win in this industry. Gunner has also told you that he is mainly focused on maintaining the customers he has rather than seeking out a lot of new ones. At the end of the day, he admits that his companys ultimate objective is increasing the bottom line. a. Working together in a team, list one strategic objective for each performance perspective of the balanced scorecard based on the information Gunner provided. b. For each strategic objective you came up with in part (a), list at least one performance metric. c. Describe the relationships that would be illustrated by a strategy map of Youngs balanced scorecard. d. Describe the relationships that would be illustrated by a measure map of Youngs balanced scorecard.

Carson Wellington, president of Mallory Plastics, was considering a report sent to him by Emily Sorensen, vice president of operations. The report was a summary of the progress made by an activity-based management system that was implemented three years ago. Significant progress had indeed been realized. At the conclusion of the report, Emily urged Carson to consider the adoption of the Balanced Scorecard as a logical next step in the companys efforts to establish itself as a leader in its industry. Emily clearly was impressed by the Balanced Scorecard and intrigued by the possibility that the change would enhance the overall competitiveness of Mallory. She requested a meeting of the executive committee to explain the similarities and differences between the two approaches. Carson agreed to schedule the meeting but asked Emily to prepare a memo in advance, listing the most important similarities and differences between the two approaches to responsibility accounting. Required: Prepare the memo requested by Carson.

Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firms controller. Leonard: Chuck, as you know, our firm has been losing market share over the past 3 years. We have been losing more and more bids, and I dont understand why. At first, I thought that other firms were undercutting simply to gain business, but after examining some of the public financial reports, I believe that they are making a reasonable rate of return. I am beginning to believe that our costs and costing methods are at fault. Chuck: I cant agree with that. We have good control over our costs. Like most firms in our industry, we use a normal job-costing system. I really dont see any significant waste in the plant. Leonard: After talking with some other managers at a recent industrial convention, Im not so sure that waste by itself is the issue. They talked about activity-based management, activity-based costing, and continuous improvement. They mentioned the use of something called activity drivers to assign overhead. They claimed that these new procedures can help to produce more efficiency in manufacturing, better control of overhead, and more accurate product costing. A big deal was made of eliminating activities that added no value. Maybe our bids are too high because these other firms have found ways to decrease their overhead costs and to increase the accuracy of their product costing. Chuck: I doubt it. For one thing, I dont see how we can increase product-costing accuracy. So many of our costs are indirect costs. Furthermore, everyone uses some measure of production activity to assign overhead costs. I imagine that what they are calling activity drivers is just some new buzzword for measures of production volume. Fads in costing come and go. I wouldnt worry about it. Ill bet that our problems with decreasing sales are temporary. You might recall that we experienced a similar problem about 12 years agoit was 2 years before it straightened out. Required: 1. Do you agree or disagree with Chuck Davis and the advice that he gave Leonard Bryner? Explain. 2. Was there anything wrong or unethical in the behavior that Chuck Davis displayed? Explain your reasoning. 3. Do you think that Chuck was well informedthat he was aware of the accounting implications of ABC and that he knew what was meant by cost drivers? Should he have been well informed? Review (in Chapter 1) the first category of the Statement of Ethical Professional Practice for management accountants. Do any of these standards apply in Chucks case?

Performance Principle: Planning. Your public accounting practice is located in a city of15,000 people. The majority of your work, conducted by you and two assistants, consistsof compiling clients’ monthly statements and preparing income tax returns for individualsfrom cash data and partnership returns from books and records. You have a small number ofaudit clients; given the current size of your practice, you generally consider it a challenge toaccept new audit clients.One of your corporate clients is a retail hardware store. Your work for this client has beenlimited to preparing the corporate income tax return from a trial balance submitted by thebookkeeper.On December 26, you receive from the president of the corporation a letter containingthe following request:We have made arrangements with First National Bank to borrow $500,000 to finance thepurchase of a complete line of appliances. The bank has asked us to furnish our auditors’ certifiedstatement as of December 31, which is the…

Ethics and the Manager Richmond. Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports. Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. Required: 1. According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlman not…

The task I am struggling with: Mt. Kinley is a strategy consulting firm that divides its consultants into three classes: associates, managers, and partners. The firm has been stable in size for the last 20 years, ignoring growth opportunities in the 90s, but also not suffering from a need to downsize in the recession at the beginning of the 21st century. Specifically, there have been – and are expected to be – 200 associates, 60 managers, and 20 partners. The work environment at Mr. Kinley is rather competitive. After four years of working as an associate, a consultant goes “either up or out”; that is, becomes a manager or is dismissed from the company. Similarly, after six years a manager either becomes a partner or is dismissed. The company recruits MBA’s as associate consultants; no hires are made at the manager or partner level. A partner stays with the company for another 10 years (a total of 20 years with the company).a) How many new MBA graduates does Mt. Kinley have to hire…

Austin BBQ has seen rapid growth in the last five years. It started with one store and is now located in 15 different locations across five cities. The CEO has noticed that costs are increasing and so is beginning to standardize practices across the various locations. Which of the following perspectives is most consistent with the CEO's efforts? Group of answer choices 1.Rational System 2.Natural System 3.Open System 4.Operational System

RH Bhd is just starting up. The management team has decided from the beginning that decentralization was the preferred organizational style and has made this clear in all interviews and discussions with potential employees. Mr. Pang, the CEO, is unsure about the best way to evaluate his division managers. He has heard the terms return on investment, residual income, economic value added, and flexible budgets but wants to know the pros and cons of each. Electronic Telephone Systems (ETS), a division of RH Bhd buys and installs modular office components. For the most recent year, the division had the following performance targets: Asset turnover Profit margin Target rate of return on investments for RI Cost of capital Income tax rate 2.5 6% 13% 10% 40% Actual information concerning the company's performance for last year follows: Total assets at beginning of year Total assets at end of year Total invested capital (annual average) Sales RM3,600,000 RM5,300,000 RM8,000,000 RM9,000,000…

Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement. Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings. Furniture 132,500 $ 10.00 6.00 2.00 Product…

Ethics and the ManagerRichmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodelling of its stores to attract a more upscale clientele.Before finalizing these plans, two stores were remodelled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.1. Managerial Accounting2. Would it be easy for Perlman to take the ethical action in this situation?

Outsourcing Call Centers; Strategy; Ethics; Present-Value Analysis (Chapter 12) Merchants’Bank (MB) is a large regional bank operating in 634 locations in the southeastern United States.Until 2014, the bank operated a call center for customer inquiries out of a single location in Atlanta,Georgia. MB understood the importance of the call center for overall customer satisfaction andmade sure that the center was managed effectively. However, in early 2013, it became clear that thecost of running the center was increasing very rapidly, along with the firm’s growth, and that someissues were arising about the quality of the service. To improve the quality and dramatically reducethe cost of the service, MB moved its call center to Bangalore, India, to be run by an experiencedoutsourcing firm, Naftel, which offers similar services to other banks like MB.The Naftel contract was for 5 years, and in late 2017 it was time to consider whether to renewthe contract, change to another call center…

Artistic group is one of the largest exporters of Pakistan. From last 6 years their revenue & profit goes down & good will has also damaged. They have appointed you as a new Management accountant to resolve the issue. How you will apply TOTAL QUALITY MANAGEMENT (TQM) to enhance the performance of the organization, Explain in detail with examples.

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