Professional Documents
Culture Documents
CHAPTER 23
I. Questions
1.
Strategy Weakness
Cost leadership The tendency to cut costs in a way that undermines
demand for the product or service.
Differentiation The firm’s tendency to undermine its strength by
attempting to lower costs or by lacking a continual
and aggressive marketing plan to reinforce the
perceived difference.
Focus The market niche may suddenly disappear due to
technological change in the industry or change in
consumer tastes.
2. The balanced scorecard is an accounting report that includes the firm’s
critical success factors in four areas: customer satisfaction, financial
performance, internal business processes, and innovation and learning
(human resources). The primary objective of the balanced scorecard is to
serve as an action plan, a basis for implementing the strategy expressed in
the critical success factors.
3. The balanced scorecard is important to integrate both financial and non-
financial information into management reports. Financial measures
reflect only a partial- and short-term measure of the firm’s progress.
Without strategic non-financial information, the firm is likely to stray
from its competitive course and to make strategically wrong product
decisions – to choose the wrong products, the wrong customers. The
balanced scorecard provides a basis for a more complete analysis than is
possible with financial data alone.
4. An analyst can incorporate other factors such as the growth in the overall
market and reductions in selling prices resulting from productivity gains
into a strategic analysis of operating income. To do so, the analyst
attributes the sources of operating income changes to the particular
factors of interests. For example, the analyst will combine the operating
income effects of strategic price reductions and any resulting growth with
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Chapter 23 Strategic Cost Management; Balanced Scorecard
Requirement 1
a, b, and c
Month
1 2 3 4
Throughput time in days:
Process time...................................................
0.6 0.5 0.5 0.4
Inspection time...............................................
0.7 0.7 0.4 0.3
Move time......................................................
0.5 0.5 0.4 0.5
Queue time.....................................................
3.6 3.6 2.6 1.7
Total throughput time.....................................
5.4 5.3 3.9 2.9
Manufacturing cycle efficiency
(MCE):
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Strategic Cost Management; Balanced Scorecard Chapter 23
Requirement 2
The general trend is favorable in all of the performance measures except for
total sales. On-time delivery is up, process time is down, inspection time is
down, move time is basically unchanged, queue time is down, manufacturing
cycle efficiency is up, and the delivery time is down. Even though the
company has improved its operations, it has not yet increased its sales. This
may have happened because management attention has been focused on the
factory – working to improve operations. However, it may be time now to
exploit these improvements to go after more sales – perhaps by increased
product promotion and better marketing strategies. It will ultimately be
necessary to increase sales so as to translate the operational improvements
into more profits.
Requirement 3
a and b
Month
5 6
Throughput time in days:
Process time................................................... 0.4 0.4
Inspection time............................................... 0.3
Move time...................................................... 0.5 0.5
Queue time.....................................................
Total throughput time..................................... 1.2 0.9
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Chapter 23 Strategic Cost Management; Balanced Scorecard
1. D 6. C
2. D 7. D
3. C 8. C
4. A 9. D
5. A 10. A
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