QUESTION 1: There is a company called Blake Inc. and it refines gasoline and sells the gasoline in its own Blake gas stations. Blake ascertains that 60% of its customers (medium to high income people) will pay a higher price for its gas if the gas stations provide exceptional customer service (i.e. clean facility, convenience store, quick turnaround, friendly employees, ability to pay by credit card, and high octane premium fuel). The previous is based on market research. In 2005, the market wide prices for the inputs and outputs and the size of the market didnâ€™t change. Blakeâ€™s balanced scorecard for 2005 is below. We have assumed that the initiatives taken under each objective are omitted, for simplicity sake. Objectives Measures Target Performance Actual Performance FINANCIAL PERSPECTIVE: Increased shareholder value Operating income changes from price recovery. $90,000,000 $95,000,000 Operating income changes from growth Market share of total gasoline market $65,000,000 $67,000,000 10% 9.8% Improve gasoline quality. Quality index 94 points 95 points Improve refinery performance. Refinery reliability index (%) 91% 91% Ensure gasoline availability. LEARNING AND GROWTH PERSPECTIVE: Increase refinery process capability Product availability index (%) Percentage of refinery processes with advanced controls 99% 100% 88% 90% CUSTOMER PERSPECTIVE: Increase market share INTERNAL BUSINESS PROCESS PERSPECTIVE: REQUIRED: 5) In 2005, do you think that Blake was successful with the implementation of its strategy? Please explain your answer thoroughly. 6) Do you think some measure of employee satisfaction and employee training in learning and growth perspective should have been included? For the implementation of its strategy, do you think these objectives are crucial for Blake? Why or why not? Please explain your answer thoroughly. 7) How did Blake not achieve its market target share in the total gasoline market but was still able to surpass its financial goals? Please explain your answer thoroughly. For the measure of market share, do you think the â€œmarket share in the total gasoline marketâ€ is right? Please explain your answer thoroughly. 8) Do you think that there exists a clear and concise cause-and-effect relationship between improvements in the internal business process perspective measures and the customer perspective measures? For the internal business process perspective or the customer perspective, do you think you would add other measures? Why or why not? Please explain your answer thoroughly. 9) Blake made the choice to not include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard, do you agree with this choice? Please explain your answer thoroughly. QUESTION 2: There is a company called Macyâ€™s. This company manufactures and sells five types of products. All five types of products are serviced and sold by an individual sales force, and none have its own product manager or marketing staff. Macyâ€™s manufacturing facilities are general-purpose facilities. Furthermore, all the products require operations in each department of the factory. Below are details for the five products (all dollar amounts are averages per unit). Annual sales (units) Discounts and allowances Variable costs Fixed costs Unit price PRODUCT A 200,000 PRODUCT B 1,000,000 PRODUCT C 500,000 PRODUCT D 400,000 PRODUCT E 800,000 $0.05 $0.03 $0.12 $0.16 $0.10 1.42 0.84 2.50 0.84 0.46 1.50 2.81 1.95 3.95 3.12 2.42 5.70 5.22 1.46 8.00 It is known that none of the fixed costs can be traced to a specific product. Also, the costs are allocated to products based on various predetermined overhead rates. Also, the amounts allocated to any one of the products is dependant on its relative use of the different portions of the companyâ€™s facilities. It is known that no overhead costs stay unassigned at the volumes and rates shown above. REQUIRED: 10) For each product compute the break-even volume (in dollars of gross sales), reflecting the fixed costs the company plans to assign to that product. 11) For the company as a whole compute the break-even volume (in dollars of gross sales), at the present product mix. Why is it that the answer computed in part (a), i.e. the sum of the break-even volumes, is different from your answer in part (b)? 12) How dependable do you think are the approximations of the break-even volume obtained in parts (a) and (b), based on your understanding of the nature of the fixed costs of Macyâ€™s? Please explain your answer thoroughly. 13) Write down a forecast of Macyâ€™s income before taxes if Macyâ€™s selling efforts generates the products sales below instead of the ones shown in the table above (all other factors remain unaffected). PRODUCT UNIT SALES A 150,000 B 800,000 C 400,000 D E 500,000 1,000,000 14) If the fixed selling expenses needed to be augmented by $400,000 a year in order to cause the move in product mix described in part (d), do you think that you would advocate doing this? Please explain your answer thoroughly. Intermediate Accounting Question QUESTION 3: For the following statements, please state whether each one is True or False. Please explain your reasoning thoroughly. 15) The declining balance method of amortization ignores residual value in the calculation of an assetâ€™s depreciable base. ________________ 16) The accounting profession has developed specifically recommended procedures for recording appraisal increases with respect to plant assets. ________________ 17) The straight-line method of amortization is based on the assumption that amortization expense can be regarded as a constant function of time. ________________ 18) An assetâ€™s cost minus its accumulated amortization equals its book value. ________________ 19) Plant assets should be written down (below cost) when their market value has declined temporarily.