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Balanced scorecard, IT allocation, allocation base

1. Balanced Scorecard
Balanced scorecard is one of those management fads that will disappear several years in the future. In addition, managerial accounting should be about the numbers and not subjective criteria. Please support or refute the above statements.

2. Allocation of Costs, or Not
Information technology costs are currently being charged at internally developed standard rates. Client departments believe that the costs are too high and have cut back on expenditures, including replacements and repairs. The IT department cannot deploy upgrades or current software on older computers and find it increasingly difficult to repair older computers. You have heard that if these charges were eliminated, IT costs would increase dramatically. What do you do?

3. For each of the types of common costs in the first group, select the most appropriate allocation base from the second group:
-Common Cost-
Building Utilities
Payroll Accounting
Insurance
Equipment Repair
Quality Control Inspection

-Allocation Base-
Value of Equipment and Inventories
Number of Units Produced
Number of Employees
Space Occupied
Number of Service Calls

4. Balanced Scorecard-Performance Measures.
Match each of the following performance measures to one or more of the four perspectives of the balanced scorecard. Note that a performance measure could measure performance for more than one perspective.
-Performance Measures-
Employee productivity
Employee satisfaction
Return on investment
Customer satisfaction
Employee turnover
On-time delivery performance from suppliers
Percentage of customers who are repeat customers
On-time delivery performance to customers
Product quality

-Balanced Scorecard perspectives-
Financial
Customer
Internal business
Learning and growth

Solution Preview

1. Balanced Scorecard
Balanced scorecard is one of those management fads that will disappear several years in the future. In addition, managerial accounting should be about the numbers and not subjective criteria. Please support or refute the above statements.

I disagree. We had "fads" for performance measures, first net income was the darling. The higher the better. Then return on assets took over to avoid "buying income" by increasing assets for which the return was low. Then return on assets fell from favor because it created incentives to cherry pick only high ROA projects and not to grow. So, residual income (EVA) came in and said that any project earning over the hurdle rate should be embraced, not just super high ROA projects. All of these fells from grace because they over-optimized a single measure. We have now figured out that any single measure will be over-optimized and "gamed." So, we are now in the "scorecard" or "dashboard" ...

Solution Summary

Your discussion is 536 words and sorts measures by perspectives in the balanced scorecard. The response argues that the scorecard is here to stay and why. A solution for the IT allocation issue is suggested.

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