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Chapter 24: Q24RQ (page 1355)
What are some limitations of financial performance measures?
Measurement problems and a short-term concentration are two drawbacks of financial performance measurements.
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One subunit of Track Sports Company had the following financial results last month:
Subunit X Actual Results Flexible Budget Flexible Budget % Variance
Variance (F or U) (F or U)
Net Sales
Revenue \( 474,000 \) 455,000
Variable
Expenses 261,000 255,000
Contribution
Margin 213,000 200,000
Traceable
Fixed Expenses 38,000 29,000
Divisional
Segment Margin \( 175,000 \) 171,000
Requirements
1. Complete the performance evaluation report for this subunit (round to two decimal places).
2. Based on the data presented and your knowledge of the company, what type of responsibility center is this subunit?
3. Which items should be investigated if part of management鈥檚 decision criteria is to investigate all variances equal to or exceeding \(8,000 andexceeding 10% (both criteria must be met)?
4. Should only unfavorable variances be investigated? Explain.
5. Is it possible that the variances are due to a higher-than-expected sales volume? Explain.
6. Will management place equal weight on each of the variances exceeding \)8,000? Explain.
7. Which balanced scorecard perspective is being addressed through this performance report? In your opinion, is this performance report a lead or a lag indicator? Explain.
8. List one key performance indicator for the three other balanced scorecard perspectives. Make sure to indicate which perspective is being addressed by the indicators you list.
What is a responsibility center?
Management by exception is a term often used in performance evaluation. Describe management by exception and how it is used in the evaluation of cost, revenue, and profit centers.
Explain the difference between a centralized company and a decentralized company.
Classify each key performance indicator according to the balancedscorecard perspective it addresses. Choose from the following: financialperspective, customer perspective, internal business perspective, or learning andgrowth perspective.
9. Number of repeat customers
10. Employee turnover
11. Revenue growth
12. Number of on-time deliveries
13. Number of defects found during the manufacturing process
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