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Q14E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1359

Short Answer

Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective.

a. Number of customer complaints

b. Number of information system upgrades completed

c. Residual income

d. New product development time

e. Employee turnover rate

f. Percentage of products with online help manuals

g. Customer retention

h. Percentage of compensation based on performance

i. Percentage of orders filled each week

j. Gross margin growth

k. Number of new patents

l. Employee satisfaction ratings

m. Manufacturing cycle time (average length of production process)

n. Earnings growth

o. Average machine setup time

p. Number of new customers

q. Employee promotion rate

r. Cash flow from operations

s. Customer satisfaction ratings

t. Machine downtime u. Finished products per day per employee

v. Percentage of employees with access to upgraded system

w. Wait time per order prior to start of production

Four perspectives will come under the balanced scorecard: financial,customer, internal business, and learning and growth perspectives.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Key Performance Indicators

A summary is based on indicators that help the managers analyze whether the company is achieving its goals.

Step 2: Part a Number of customer complaints

The number of customer complaints will be classified as the customer perspective of the balanced scorecard. Froma customer perspective, the customer satisfaction factors come under the customer perspective.

Step 3: Part b Number of Information system upgrades completed

The number of information system upgrades completed will be classified as the learning and growth perspective of the balanced scorecard. There are three factors under learning and growth,one of which focuses on information system capabilities.

Step 4: Part c Residual Income

The residual income will be classified under the financial perspective. The financial perspective will tell the investors and creditors about the company's finances and financial stability.

Step 5: Part d New Project development time

The new project development time will be classified as Internal Business. The internal business perspective tells about what processes will help them to achieve the objectives of customers and finances.

Step 6: Part e Employee turnover rate

Employee turnover is classified into learning and growth rate. This perspective covers all the aspects which are related to employees of the company.

Step 7:Part f Percentage of products with online help manuals

The Percentage of products with online help manuals will be classified from the customer perspective. One of the attributes of the customer perspective is the product’s performance and service, which is covered by online help manuals with the products.

Step 8: Part g Customer retention

Customer retention will be classified from the customer perspective as this perspective tells us how the customer sees the company. If the company has a good image, the customer will return to the company again.

Step 9: Part h Percentage of compensation based on performance

The percentage of compensation based on performance will be classified under learning and growth as it will provide satisfaction to the company's employees.

Step 10: Part i Percentage of orders filled each week

The percentage of orders filled weekly will be classified from the internal business perspective. It is because the internal business perspective includes the operations of the business. Lean and effective internal operations allow the company to meet customers’ needs and expectations and remain competitive.

Step 11: Part j Gross margin growth

The gross margin growth will be classified from a financial perspective. It is so because the growth in the gross margin will provide information about the company's finances to the investors and the creditors.

Step 12: Part k Number of new patents

The number of new patents will be classified as the perspective of internal business. New patents mean the business is developing new products. Some factors are there from an internal business perspective; one is innovations, which means making new products.

Step 13: Part l Employee satisfaction rating

The employee satisfaction rating will come under the perspective of learning and growth as it is related to the satisfaction of employees.

Step 14: Part m manufacturing cycle time (average length of the production process)

The manufacturing cycle time will be classified as an internal business. The time for producing the goods will depend on the business's operations.

Step 15: Part n. Earnings growth

The earnings growth will be the financial perspective. It is so because the growth in the revenue will provide information about the company's finances to the investors and the creditors.

Step 16: PartoAverage machine setup time

The average machine setup time will come under the perspective of internal business as it comes under the factor of operations of internal business perspective of balanced scorecard.

Step 17: Part p Number of new customers

The number of new customers will come under the classification of customer’s perspective. The number of new customers will be attracted to the company only if the company makes innovations to the product.

Step 18: Part qEmployee promotion rate

The employee promotion rate will be classified as the balanced scorecard's learning and growth perspective. If the employees are capable, they will get the promotion.

Step 19: Part r Cash flow from operations

The cash flow operations will be classified from the financial perspective. It will show the business's finances in cash to the investors and creditors.

Step 20: Part s Customer satisfaction ratings

Customer satisfaction ratings come under the customer perspective balanced scorecard. The evaluation of the customer satisfaction rating is critical to achieving the company's financial goals outlined in the balanced scorecard's financial perspective.

Step 21: Part t Machine downtime

The machine downtime was classified as the internal business perspective. The machine downtime will affect the production process of the business, which means it is an operational flow.

Step 22: Part u Finished products per day per employee

Finished products per day per employee will come under the learning and the growth perspective. As the production by the employee will tell the company about the productivity and capabilities of the employees.

Step 23: Part v Percentage of employees with access to the upgraded system

The Percentage of employees with access to the upgraded system will also come under the learning and growth. It is because access to the new system will come under the learning and growth of the employees.

Step 24: Part w Wait time per order prior to the start of production

The wait time per order prior to the start of production will come under the internal business perspective. The time to start the production will depend on the company's operations.

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