Management Accounting - Balanced Scorecard and Its Four Measurement Perspectives

Management Account Midterm

This midterm covers the materials learned in chapters one through seven of our textbook. The questions were preselected to gauge what we have learned over the past four weeks when it comes to management accounting. The questions cover both costs and strategy involved in management account. The following are essays and calculations that will answer the selected questions.

Balanced Scorecard and its Four Measurement Perspectives.

The book describes a balanced scorecard as, "a strategic management system that translates an organization's strategy into clear objectives, measures, targets, and initiatives organized by four perspectives" (Atkinson, 2012, p. 7). Each of the four perspectives are important to the balance scorecard because together they are designed to assess the organization's performance levels, and to determine if the company is meeting their goals. The perspectives in organizing a balanced scorecard are, "financial, customer, internal, and innovative and learning" (Atkinson, 2012, pp. 19-20). The financial perspective is the way that the shareholders see the company, the customer perspective is how the clients and vendors see the company, the internal perspective is the way management runs the organization and how the employees perform; lastly the innovation and learning perspective measures the growth and the value of the organization to the community.

Why are financial and nonfinancial measures necessary to manage a company's strategy?

It is important to use financial measures because without profit the company will not succeed. Investors and shareholders need to see an increase in profits in order for them to keep investing in the company. Profits are also necessary in order for the company to grow. In regards to non financial measures, these are important when managing a company's strategy because these are things such as customer satisfaction and the management of the organization. If these and other financial things are not at one-hundred percent, in my opinion the organization needs to continue steps towards improvement. Without happy employees and happy customers it is hard to run a successful business.

How does a balanced scorecard helps in this process?

It helps in the process because it is a system that allows companies to set clear direction of what their goals and expectations are. They then take these goals and turn them into reality. They are able to do this by using the constant feedback from the balanced scorecard to help meet their forecasted goals.

Sanchez & Ryan, Inc.

The company Sanchez & Ryan, Inc. sold 20,000 units of one product this year and received $130,000 in sales revenue. Their variable costs for the year were $60,000.00, and they had $17,500 in fixed costs. The contribution and margin and breakeven point need to be determined for the company. The following is the calculations of these figuures based off of the financial information provided for Sanchez & Ryan, Inc.

What is the contribution margin per unit?

To first start calculating the contribution margin per unit for Sanchez & Ryan's take the product's price and subtracting the total variable costs. Sanchez & Ryan has sales of $130,000.00 for the year and an annual variable cost of $60,000.00. If you subtract the annual variable cost of $60,000.00 from the annual sales revenue of $130,000.00 you get a total of $70,000.00. Divide the total of $70,000.00 by the 20,000 units sold in the year, for a contribution margin of $3.50 per unit.

What is the breakeven point in units for a year?

The breakeven point for Sanchez & Ryan is 5,000 units. This can be calculated by taking the fixed costs of $17,500.00 and dividing it by the contribution margin per unit of $3.50. The contribution margin was determined in the above question.

Wisconsin Electrics

The company Wisconsin Electronics received an order for 1,000 specially designed TV/VCR combinations. The following standards were compiled for this order:

Direct materials:

Part #123 $25 per TV/VCR

Part #456 $50 per TV/VCR

Direct labor: 2.0 hours per TV/VCR at $15 per hour

Manufacturing overhead: $40 per direct labor hour

Using the information provided below I will determine the estimated direct labor and manufacturing overhead related to this specific order.

What is the estimated direct labor cost for this order?

The estimated direct labor cost for this order is $30,000. This was determining by multiplying the number of units, 1,000, by the number of direct labor hours, 2, and then multiplying this by the cost per hour of $15.00. (1,000 unit x 2 hours of labor x $15 per hour = $30,000)

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