Solutions Manual for Financial and Managerial Accounting 16th Edition By Carl Warren, Jefferson Jones,
William Tayler (All Chapters 1-28)
All Chapters Arranged Reverse: 28-1
CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN)
THE BALANCED SCORECARD AND
CORPORATE SOCIAL RESPONSIBILITY
DISCUSSION QUESTIONS
1. A strategic performance measurement system defines and links strategic objectives to the
performance metrics that a company uses. This system helps a company to align metrics with
overall goals and objectives (both financial and nonfinancial) and thereby measure
performance relating to company strategy. The balanced scorecard is the most well-known
example of a strategic performance management system.
2. Leading indicators are metrics that indicate something about performance in the future. For
example, poor customer satisfaction may indicate that sales will be down next month.
Lagging indicators are metrics that indicate something about performance that has already happened.
For example, this month’s actual sales is a lagging indicator of last month’s customer satisfaction.
3. The purpose of the performance perspectives is primarily to help management look beyond the
typical financial measures of performance, such as sales and profits, encouraging a more
balanced view of performance. Performance perspectives also help to organize the balanced
scorecard into types of performance.
4. Strategic objectives define the purpose of an action taken within the company. They are
essentially subcomponents of the organization’s overall mission statement or strategy. Strategic
initiatives are action plans that management implements to achieve the strategic objectives. In
other words, strategic objectives are different goals a company wants to achieve, and strategic
initiatives are the plans a company makes to achieve those goals.
5. Strategy maps show the expected cause-and-effect relationships among strategic objectives. For
example, a strategy map may illustrate that fulfilling the strategic objective to reduce delivery
times will cause customers to be more satisfied, contributing to a separate strategic objective to
please the customer. Strategy maps add value to the balanced scorecard by illustrating how each
strategic objective contributes to the overall mission or strategy of the company.
6. Some objectives on a company-wide scorecard may not specifically relate well to the
company’s specific departments (e.g., Shipping & Receiving, Sales, Production, etc.). However, to
be effective, balanced scorecards should be relevant for each level of management in the
company. Scorecard cascading accomplishes this purpose by using multiple scorecards that are
divided up into smaller, division- and job-specific scorecards.
7. People subject to motivated reasoning tend to ignore bad news, rely too heavily on good news,
stop gathering information when results look good, continue searching for good news when
things look bad, and interpret ambiguous news as good news.
8. A company using scorecard cascading will have unique scorecards for each division or
department of the company and for each level of management. This makes it difficult for
top-level managers to compare the performance of employees or managers in different divisions,
because their performance will likely be measured by different metrics. This will tempt
top-level managers to place more weight on performance metrics that these employees have in
common and possibly ignore performance metrics unique to each employee. This constitutes
common measures bias.
28-1
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
DISCUSSION QUESTIONS (Concluded)
9. Corporate social responsibility is the general term for the efforts of companies to take
responsibility for the impact their operations have on society and to improve social well-being
within and outside the firm. Sustainability efforts are corporate social responsibility activities
that involve ensuring the ability to meet current needs without compromising the ability of future
generations to meet their needs (e.g., efforts to protect the environment).
10. Companies can use the balanced scorecard to address CSR objectives in a variety of ways. One
way is to include CSR objectives and activities in a separate CSR performance perspective.
Alternatively, companies can integrate CSR strategic objectives into the four perspectives of the
balanced scorecard, creating what is called a sustainability balanced scorecard.
28-2
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
BASIC EXERCISES
BE 28–1 (FIN MAN); BE 14–1 (MAN)
Leading indicators:
Employee turnover
Average shipping time
Median training hours per employee
Lagging indicators:
Number of returning customers
Total sales
Market share
Remember: A leading indicator can be any metric where performance is predictive of
performance in another metric. Similarly, a lagging indicator can be any metric where
performance is predicted by performance in another metric.
BE 28–2 (FIN MAN); BE 14–2 (MAN)
Performance Possible Performance Metrics
Strategic Objective Perspective (Not an exhaustive list)
Increase profits Financial • Market share
• Operating profit
• Gross profit
Increase market Customer • Number of new customers
share • Percentage of sales from new customers
• Number of leads
Improve production Internal • Average production time per product
efficiency processes • Total costs of production
• Average cost of production per product
Attract top Learning • Percentage of entry-level hires with
talent and growth master’s degree
• Percentage of entry-level hires from top
10 colleges
• Percentage of interns from top 10 colleges
who become full-time hires
BE 28–3 (FIN MAN); BE 14–3 (MAN)
Sales $ 230,000
Cost of goods sold (150,000)
Depreciation expense (30,000)
Other expense (20,000)
Net income $ 30,000
Cost of shipping error: $3,000 + $2,000 = $5,000
Break-even shipping errors: $30,000 ÷ $5,000 = 6
28-3
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
BE 28–4 (FIN MAN); BE 14–4 (MAN)
a. The owner made her decision entirely based on the number of orders of the gumbo
dish at each location. She mistakenly ignored the number of customer complaints
about the dish. Some simple data analysis reveals that while the number of orders
was about 32% higher [(1,331 + 1,427 + 1,515 + 1,383) ÷ (1,106 + 1,024 + 1,215 + 929)
= 132%] where the new gumbo dish recipe was used, the number of complaints
about the gumbo dish was significantly higher [(39 + 36 + 47 + 32) ÷ (3 + 9 + 6 + 8) =
592%] at these locations. So the new recipe was ordered more, but also complained
about much more, yielding mixed results. Considering this information, the owner
should have investigated the effects of the new recipe further before deciding to
implement it at all locations.
b. The cognitive bias at play in this situation was motivated reasoning. Because the
owner developed the new recipe herself and wanted it to succeed, she overvalued
the positive feedback about it and ignored the negative feedback.
BE 28–5 (FIN MAN); BE 14–5 (MAN)
a. Minimizing emissions by switching to an all-electric fleet is an internal operations
change and, therefore, falls under the internal processes performance perspective.
b. The percentage of electric-powered trucks in the fleet would be a helpful
performance metric for the company’s strategic objective.
c. A 10% increase per year (i.e., replace 20 old trucks with electric trucks per year)
would be an appropriate yearly performance target. Given that the company wants
to gradually switch to an all-electric fleet over the next 5 years, and that currently
100 of the company’s 200 trucks are not electric-powered, it will need to see a 10%
increase per year in the percentage of electric-powered trucks in the fleet before it
reaches its goal of 100% after 5 years (50% increase needed ÷ 5 years = 10%
increase per year).
28-4
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
William Tayler (All Chapters 1-28)
All Chapters Arranged Reverse: 28-1
CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN)
THE BALANCED SCORECARD AND
CORPORATE SOCIAL RESPONSIBILITY
DISCUSSION QUESTIONS
1. A strategic performance measurement system defines and links strategic objectives to the
performance metrics that a company uses. This system helps a company to align metrics with
overall goals and objectives (both financial and nonfinancial) and thereby measure
performance relating to company strategy. The balanced scorecard is the most well-known
example of a strategic performance management system.
2. Leading indicators are metrics that indicate something about performance in the future. For
example, poor customer satisfaction may indicate that sales will be down next month.
Lagging indicators are metrics that indicate something about performance that has already happened.
For example, this month’s actual sales is a lagging indicator of last month’s customer satisfaction.
3. The purpose of the performance perspectives is primarily to help management look beyond the
typical financial measures of performance, such as sales and profits, encouraging a more
balanced view of performance. Performance perspectives also help to organize the balanced
scorecard into types of performance.
4. Strategic objectives define the purpose of an action taken within the company. They are
essentially subcomponents of the organization’s overall mission statement or strategy. Strategic
initiatives are action plans that management implements to achieve the strategic objectives. In
other words, strategic objectives are different goals a company wants to achieve, and strategic
initiatives are the plans a company makes to achieve those goals.
5. Strategy maps show the expected cause-and-effect relationships among strategic objectives. For
example, a strategy map may illustrate that fulfilling the strategic objective to reduce delivery
times will cause customers to be more satisfied, contributing to a separate strategic objective to
please the customer. Strategy maps add value to the balanced scorecard by illustrating how each
strategic objective contributes to the overall mission or strategy of the company.
6. Some objectives on a company-wide scorecard may not specifically relate well to the
company’s specific departments (e.g., Shipping & Receiving, Sales, Production, etc.). However, to
be effective, balanced scorecards should be relevant for each level of management in the
company. Scorecard cascading accomplishes this purpose by using multiple scorecards that are
divided up into smaller, division- and job-specific scorecards.
7. People subject to motivated reasoning tend to ignore bad news, rely too heavily on good news,
stop gathering information when results look good, continue searching for good news when
things look bad, and interpret ambiguous news as good news.
8. A company using scorecard cascading will have unique scorecards for each division or
department of the company and for each level of management. This makes it difficult for
top-level managers to compare the performance of employees or managers in different divisions,
because their performance will likely be measured by different metrics. This will tempt
top-level managers to place more weight on performance metrics that these employees have in
common and possibly ignore performance metrics unique to each employee. This constitutes
common measures bias.
28-1
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
DISCUSSION QUESTIONS (Concluded)
9. Corporate social responsibility is the general term for the efforts of companies to take
responsibility for the impact their operations have on society and to improve social well-being
within and outside the firm. Sustainability efforts are corporate social responsibility activities
that involve ensuring the ability to meet current needs without compromising the ability of future
generations to meet their needs (e.g., efforts to protect the environment).
10. Companies can use the balanced scorecard to address CSR objectives in a variety of ways. One
way is to include CSR objectives and activities in a separate CSR performance perspective.
Alternatively, companies can integrate CSR strategic objectives into the four perspectives of the
balanced scorecard, creating what is called a sustainability balanced scorecard.
28-2
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
BASIC EXERCISES
BE 28–1 (FIN MAN); BE 14–1 (MAN)
Leading indicators:
Employee turnover
Average shipping time
Median training hours per employee
Lagging indicators:
Number of returning customers
Total sales
Market share
Remember: A leading indicator can be any metric where performance is predictive of
performance in another metric. Similarly, a lagging indicator can be any metric where
performance is predicted by performance in another metric.
BE 28–2 (FIN MAN); BE 14–2 (MAN)
Performance Possible Performance Metrics
Strategic Objective Perspective (Not an exhaustive list)
Increase profits Financial • Market share
• Operating profit
• Gross profit
Increase market Customer • Number of new customers
share • Percentage of sales from new customers
• Number of leads
Improve production Internal • Average production time per product
efficiency processes • Total costs of production
• Average cost of production per product
Attract top Learning • Percentage of entry-level hires with
talent and growth master’s degree
• Percentage of entry-level hires from top
10 colleges
• Percentage of interns from top 10 colleges
who become full-time hires
BE 28–3 (FIN MAN); BE 14–3 (MAN)
Sales $ 230,000
Cost of goods sold (150,000)
Depreciation expense (30,000)
Other expense (20,000)
Net income $ 30,000
Cost of shipping error: $3,000 + $2,000 = $5,000
Break-even shipping errors: $30,000 ÷ $5,000 = 6
28-3
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 28 (FIN MAN); CHAPTER 14 (MAN) The Balanced Scorecard and Corporate Social Responsibility
BE 28–4 (FIN MAN); BE 14–4 (MAN)
a. The owner made her decision entirely based on the number of orders of the gumbo
dish at each location. She mistakenly ignored the number of customer complaints
about the dish. Some simple data analysis reveals that while the number of orders
was about 32% higher [(1,331 + 1,427 + 1,515 + 1,383) ÷ (1,106 + 1,024 + 1,215 + 929)
= 132%] where the new gumbo dish recipe was used, the number of complaints
about the gumbo dish was significantly higher [(39 + 36 + 47 + 32) ÷ (3 + 9 + 6 + 8) =
592%] at these locations. So the new recipe was ordered more, but also complained
about much more, yielding mixed results. Considering this information, the owner
should have investigated the effects of the new recipe further before deciding to
implement it at all locations.
b. The cognitive bias at play in this situation was motivated reasoning. Because the
owner developed the new recipe herself and wanted it to succeed, she overvalued
the positive feedback about it and ignored the negative feedback.
BE 28–5 (FIN MAN); BE 14–5 (MAN)
a. Minimizing emissions by switching to an all-electric fleet is an internal operations
change and, therefore, falls under the internal processes performance perspective.
b. The percentage of electric-powered trucks in the fleet would be a helpful
performance metric for the company’s strategic objective.
c. A 10% increase per year (i.e., replace 20 old trucks with electric trucks per year)
would be an appropriate yearly performance target. Given that the company wants
to gradually switch to an all-electric fleet over the next 5 years, and that currently
100 of the company’s 200 trucks are not electric-powered, it will need to see a 10%
increase per year in the percentage of electric-powered trucks in the fleet before it
reaches its goal of 100% after 5 years (50% increase needed ÷ 5 years = 10%
increase per year).
28-4
© 2023 Cengage®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
