DISCUSSION
Research and locate STARBUCKS’ balanced scorecard report. Share the report with
the class and highlight three pieces of information found within that report.
At least one of both a financial and non-financial measurement should be highlighted.
Remember, not all companies use the terminology “Balanced Scorecard”. They may call
their official broad measurement report something different. MAX 250 WORDS.
ASSIGNMENT 1
1. Relevant costs, Opportunity costs, and Sunk costs are often involved in a make
or buy decision for a company. By buying a part instead of making it, the
company could earn an additional $50,000-that’s the Opportunity cost. Relevant
costs, in deciding whether to ‘special’ manufacture something, would be your
VC-Variable costs only-since your FC-Fixed Costs-will stay the same whether or
not you are producing anything. The KEY: you have the capacity to manufacture
it. Therefore, as long as the selling price is greater than your VC, you should
accept the special order. You will make money! A Sunk cost is money already
spent: you can not get it back: comparable to a bad investment, or losing money
at the casino.
REQUIRED: Think of the decision in your life WHERE YOU DECIDED TO TAKE
A SABBATICAL YEAR TO TRAVEL INSTEAD OF WORKING. That created an
Opportunity cost decision. How did you make your decision?
2. Budgetary Planning is a written statement of management’s plans for a specified
period. Each level of management usually gets involved in creating the budget-that’s
called Participative Budgeting. The Master Budget includes budgets for all the financial
statements- the Operating Budget =Income Statement; the Financial Budgets = Balance
Sheet, Statement of Cash Flows. Budgets always start with the Sales Budget, followed
by the Selling, General and Administration Expenses budget. Your goal is a profit; Sales
greater than your Expenses.
REQUIRED: Create a budget for yourself. Tell me whether you are spending more than
you are taking in. YOU DO NOT HAVE ANY DEBTS. What additional changes can you
make in your lifestyle to stay out of debt?
3. Many businesses have both Profit and Cost Centers. In a Profit Center, Sales minus
your VC-Variable Costs-equals your CM-Contribution Margin. CM less your Controllable
FC-Fixed Costs-such as Depreciation, Insurance, Rent, etc-equals your Controllable
Margin. The Controllable Margin divided by your Average Operating Assets-such as
Property, Plant and Equipment-equals your ROI-Return on Investment. The CM Ratio or
Percentage equals the CM divided by your Unit Cost. Example: Unit Cost: $100; VC:
$70; CM = $30; therefore, your CM Ratio or Percentage is $30/$100 = 30%.
REQUIRED: List TWO examples of both Profit and Cost Centers…that’s all!
ASSIGNMENT 2
1. Standard Costs are budgeted costs for Direct Materials, Direct Labor and
Manufacturing Overhead in a Manufacturing environment. Standard costs do not exist in
a Merchandising-Walmart, Target etc.-or a Service-Banking, Accounting, Legal,
etc-environments. Variances are created when their is a difference between the
Standard Price and Quantity costs. Example: for Direct Materials, an Unfavorable Price
Variance would exist when the Actual Price for the Materials exceeds the Standard
Price/Cost-perhaps due to an increase in supplier prices or being forced by the
competition to use higher quality materials. However, a Favorable Quantity Variance will
occur when the Actual Quantity of Materials is less than the Standard Quantity. This
could occur when state of the art machinery purchased reduces ‘waste’ or better training
of the workforce.
REQUIRED: What would cause Price/Wages (lower or higher wages), and Quantity
(less or more labor hours) for Direct Labor?
HINT: Inexperienced/poorly trained employees; poorly maintained machines, creating
too much down-time could be issues. Management must be immediately notified when
this happens.
2. You are involved in deciding capital expenditures. This category can include a new
website for $300,000, a new machine for $900,000 or new plant for $10 million. Analysis
is done using ‘3’ methods: the Payback Method, and the ‘2’ discounted Cash Flow
Methods: the Net Present Value Method, and the Internal Rate of Return Method. The
discounted Cash Flow Methods are preferred, due to them being more accurate using
the ‘time value’ of money.
REQUIRED: The numbers using the discounted Cash Flow Methods are positive. What
other factors/variables will enter into your recommendation/decision?
