Silver Lining Inc. has a balanced scorecard with a strategy map that shows that delivery time and the number of erroneous shipments are expected to affect the company’s ability to satisfy the customer. Further, the strategy map for the balanced scorecard shows that the hours from ordered to delivered affects the percentage of customers who shop again, and the number of erroneous shipments affects the online customer satisfaction rating. The following information is also available:
- The company’s target hours from ordered to delivered is 40.
- Every hour over the ordered-to-delivered target results in a 0.5% decrease in the percentage of customers who shop again.
- The company’s target number of erroneous shipments per year is no more than 65.
- Every error over the erroneous shipments target results in a 0.5 point decrease in the online customer satisfaction rating and an added future financial loss of $500.
- The company estimates that for every 1% decrease in the percentage of customers who shop again, future profit decreases by $4,000 and market share decreases by 0.3%.
- The company also estimates that for every 1 point decrease in the overall online customer satisfaction rating (on a scale of 1 to 10), future profit decreases by $3,000 and market share decreases by 0.6%.
Using these estimates, determine how much future profit and future market share will change if:
- Average hours from ordered to shipped is 27.5.
- Average shipping time (hours from shipped to delivered) is 16.3.
- Number of erroneous shipments is 80.
Compute the changes in future profit and future market share for Company SL.
Explanation of Solution
Compute the changes in future profit for Company SL:
The changes in the future profit for Company SL is $17,350.
Compute the changes in future market share for Company SL:
The changes in the future profit for Company SL is $17,350.
Working Note (1):
Compute the average hours from ordered to delivery:
The hours above the target average delivery time is 3.8 hours
Working Note (2):
Compute the decrease in percentage of customers who would shop again:
The decrease in percentage of customers who would shop again is 1.9%.
Working Note (3):
Compute the effect of erroneous shipment above target:
Working Note (4):
Compute the decrease in overall online customer satisfaction rating:
The decrease in overall online customer satisfaction rating is 0.75
Working Note (5):
Compute the added future financial loss:
The added future financial loss is $7,500
Working Note (6):
Compute the effect of decrease in percentage of customers who would shop again on future profit:
There will be a decrease of the future profit by $7,600.
Working Note (7):
Compute the effect of decrease in percentage of customers who would shop again on future market share:
There will be a decrease of the future market share by 5.7%.
Working Note (8):
Compute the effect of decrease in overall online customer satisfaction rating on future profit:
There will be a decrease of the future profit by $2,250.
Working Note (9):
Compute the effect of decrease in overall online customer satisfaction rating on future market share:
There will be a decrease of the future market share by 0.45%.
Want to see more full solutions like this?
Chapter 14 Solutions
Managerial Accounting
- Measure Maps Silver Lining Inc. has a balanced scorecard with a strategy map that shows that delivery time and the number of erroneous shipments are expected to affect the company’s ability to satisfy the customer. Further, the strategy map for the balanced scorecard shows that the hours from ordered to delivered affects the percentage of customers who shop again, and the number of erroneous shipments affects the online customer satisfaction rating. The following information is also available: The company’s target hours from ordered to delivered is 20. Every hour over the ordered-to-delivered target results in a 0.5% decrease in the percentage of customers who shop again. The company’s target number of erroneous shipments per year is no more than 55. Every error over the erroneous shipments target results in a 0.5 point decrease in the online customer satisfaction rating and an added future financial loss of $800. The company estimates that for every 1% decrease in the percentage of…arrow_forwardizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, nd market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: Every shipping error over three shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above three days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before three days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.'s current customer retention rate is 60%. The company estimates that for every 1% increase or decrease in the customer retention rate,…arrow_forwardRizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, and market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: Every shipping error over 2 shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above 2 days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before 2 days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.’s current customer retention rate is 75%. The company estimates that for every 1% increase or decrease in the customer retention rate, market share…arrow_forward
- Measure Maps Silver Lining Inc. has a balanced score card with a strategy map that shows that delivery time and the number of erroneous shippments are expected to affect the company's ability to satisfy the customer. Further, the strategy map for the balanced score scare shows that the hours from ordered to dekivered affects the online customer satisfaction rating. The following information is also available: The company's target hours from ordered to delivered is 30 . Every hour over the ordered-to-delivered target results in a 0.5% decrease in the percentage of customers who shop again. The company's target number of erroneous shipments per year is no more than 55 Every error over the erroneous shipments target results in a 0.5 point decrease in the online customer satisfaction rating and an added future finanical loss of $600. The company estimates that for every 1% decrease in the percentage of customers who stop again, future profit decreases by $3,000 and market share decrease…arrow_forwardRizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, and market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: Every shipping error over 3 shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above 3 days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before 3 days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.'s current customer retention rate is 70%. ● The company estimates that for every 1% increase or decrease in the customer retention rate, market share…arrow_forwardInc. has developed a balanced scorecard with the following performance metrics:• Total sales• Employee turnover• Market share• Number of shipping errors• Median training hours per employee• Number of new customersRelative to the metric “customer satisfaction ratings,” which of these performance metrics are leading indicators and which are lagging indicators?arrow_forward
- Measure Maps Rizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, and market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: . Every shipping error over three shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above three days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before three days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.'s current customer retention rate is 60%. The company estimates that for every 1% increase or decrease in the customer…arrow_forwardMeasure Maps Rizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, and market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: Every shipping error over 2 shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above 2 days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before 2 days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.’s current customer retention rate is 65%. The company estimates that for every 1% increase or decrease in the customer retention rate,…arrow_forwardDescribing the balanced scorecard and identifying key performance indicators for each perspective 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. Number of customer complaints Number of information system upgrades completed Residual income New product development time Employee turnover rate Percentage of products with online help manuals Customer retention Percentage of compensation based on performance Percentage of orders filled each week Gross margin growth Number of new patents Employee satisfaction ratings Manufacturing cycle time (average length of the production process) Earnings growth Average machine setup time Number of new customers Employee promotion rate Cash flow from operations Customer satisfaction ratings Machine downtime Finished products per…arrow_forward
- Describing the balanced scorecard and identifying key performance indicators for each perspective Consider the following key performance indicators, and classify each according to the balanced scorecard perspective it addresses. Choose from financial perspective, customer perspective, internal business perspective, or learning and growth perspective. a. Number of employee suggestions implemented b. Revenue growth c. Number of on-time deliveries d. Percentage of sales force with access to real-time inventory levels e. Customer satisfaction ratings f. Number of defects found during manufacturing g. Number of warranty claims h. Return on investment i. Variable cost per unit j. Percentage of market share k. Number of hours of employee training l. Number of new products developed m. Yield rate (number of units produced per hour) n. Average repair time o. Employee satisfaction p. Number of repeat customersarrow_forwardA sign of the successful implementation of a balanced scorecard is the presence of cause-andeffect relationships. An example of this success for a hotel is meeting the target of:a. decreasing a customer’s check-in time, which causes an increase in the number of implemented employee suggestions. b. increasing employee training hours, which causes employee compensation to increase.c. increasing profit, which causes an increase in employee job satisfaction ratings.d. receiving more 5-star ratings from customers, which causes an increase in profit.arrow_forward72 Inc. has developed a balanced scorecard with the following performance metrics: Total sales Employee turnover Market share Number of shipping errors Median training hours per employee Number of new customers Relative to the metric customer satisfaction ratings, which of these performance metrics are leading indicators and which are lagging indicators?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning