Canarsie Corporation uses a balanced scorecard to evaluate its digital camera manufacturing operation. Which of the following statements with respect to balanced scorecards is/are correct? I. \(A\) balanced scorecard reports management information regarding organizational performance in achieving goals classified by critical success factors to demonstrate that no single dimension of organizational performance can be relied upon to evaluate success. II. Performance measures used in a balanced scorecard tend to be divided into financial, customer, internal business process, and learning and growth. III. In a balanced scorecard, internal business processes are what the company does in its attempts to satisfy customers. 1\. I and II only are correct. 2\. Il and III only are correct. 3\. III only is correct. 4\. \(I, I I,\) and III are correct

What is downsizing?

Balanced scorecard. (R. Kaplan, adapted) Petrocal, Inc., refines gasoline and sells it through its own Petrocal gas stations. 0 n the basis of market research, Petrocal determines that \(60 \%\) of the overall gasoline market consists of "service-oriented customers," medium- to high-income individuals who are willing to pay a higher price for gas if the gas stations can provide excellent customer service, such as a clean facility, a convenience store, friendly employees, a quick turnaround, the ability to pay by credit card, and high-octane premium gasoline. The remaining \(40 \%\) of the overall market are "price shoppers" who look to buy the cheapest gasoline available. Petrocal's strategy is to focus on the \(60 \%\) of service-oriented customers. Petrocal's balanced scorecard for 2017 follows. For brevity, the initiatives taken under each objective are omitted. $$\begin{array}{lccc} & \text { Target } & \text { Actual } \\ \text { 0bjectives } & \text { Measures } & \text { Performance } & \text { Performance } \\ \hline \text {Financial Perspective} & & & \\ \text { Increase shareholder value } & \text { Operating-income changes from } & & \\ & \text { price recovery } & \$ 80,000,000 & \$ 85,000,000 \\ & \text { Operating-income changes from } & & \\ & \text { growth } & \$ 60,000,000 & \$ 62,000,000 \\ \text {Customer Perspective} & & & \\ \text { Increase market share } & \text { Market share of overall gasoline } & & \\ & \text { market } & 4 \% & 3.8 \% \\ \text { Internal-Business-Process Perspective} & & & \\ \text { Improve gasoline quality } & \text { Quality index } & \text { 92 points } & \text { 93 points } \\ \text { Improve refinery performance } & \text { Refinery-reliability index (\%) } & 91 \% & 91 \% \\ \text { Ensure gasoline availability } & \text { Product-availability index (\%) } & 99 \% & 99.5 \% \\ \text { Learning-and-Growth Perspective } & & & \\ \text { Increase refinery process capability } & \text { Percentage of refinery processes } & & \\ & \text { With advanced controls } & 94 \% & 95 \% \end{array}$$ 1\. Was Petrocal successful in implementing its strategy in \(2017 ?\) Explain your answer. 2\. Would you have included some measure of employee satisfaction and employee training in the learning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strategy? Why or why not? Explain briefly. 3\. Explain how Petrocal did not achieve its target market share in the total gasoline market but still exceeded its financial targets. Is "market share of overall gasoline market" the correct measure of market share? Explain briefly. 4\. Is there a cause-and-effect linkage between improvements in the measures in the internal-businessprocess perspective and the measure in the customer perspective? That is, would you add other measures to the internal-business- process perspective or the customer perspective? Why or why not? Explain briefly. 5\. Do you agree with Petrocal's decision not to include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard? Explain briefly.

Gable Company manufactures wallets from fabric. In 2016 , Gable made 2,160,000 wallets using 1,600,000 yards of fabric. In \(2016,\) Gable has capacity to make 2,448,000 wallets and incurs a cost of \(\$ 8,568,000\) for this capacity. In \(2017,\) Gable plans to make 2,203,200 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2017 Gable makes 2,203,200 wallets, uses 1,440,000 yards of fabric, and reduces capacity to 2,295,000 wallets at a cost of \(\$ 7,803,000\) 1\. Calculate the partial-productivity ratios for materials and conversion (capacity costs) for 2017 , and compare them to a benchmark for 2016 calculated based on 2017 output. 2\. How can Gable Company use the information from the partial-productivity calculations?

Gianni \& Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Gianni wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Gianni T-shirt. Gianni presents the following data for its first two years of operations, 2016 and 2017 . Administrative costs depend on the number of customers Gianni has created capacity to support, not on the actual number of customers served. Gianni had 3,600 customers in 2016 and 3,500 customers in 2017 1\. Is Gianni's strategy one of product differentiation or cost leadership? Explain briefly. 2\. Describe briefly the key measures Gianni should include in its balanced scorecard and the reasons for doing so.

Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017 $$\begin{array}{lrr} & 2016 & 2017 \\ \hline \text { 1. Units of D4H produced and sold } & 200 & 210 \\ \text { 2. Selling price } & \$ 40,000 & \$ 42,000 \\ \text { 3. Direct materials (kilograms) } & 300,000 & 310,000 \\ \text { 4. Direct material cost per kilogram } & \$ 8 & \$ 8.50 \\ \text { 5. Manufacturing capacity in units of D4H } & 250 & 250 \\ \text { 6. Total conversion costs } & \$ 2,000,000 & \$ 2,025,000 \\ \text { 7. Conversion cost per unit of capacity (row 6 \div row 5) } & \$ 8,000 & \$ 8,100 \\ \text { 8. Selling and customer-service capacity } & 100 \text { customers } & 95 \text { customers } \\ \text { 9. Total selling and customer-service costs } & \$ 1,000,000 & \$ 940,500 \\ \text { 10. Selling and customer-service capacity cost per customer } & \$ 10,000 & \$ 9,900 \\ \text { (row 9 \div row 8) } & & \end{array}$$ Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in \(2017 .\) Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017 1\. Is Stanmore's strategy one of product differentiation or cost leadership? Explain briefly. 2\. Describe briefly key measures that you would include in Stanmore's balanced scorecard and the reasons for doing so.