Chapter 13, Problem 21P

1. a

To determine

Compute the actual velocity and cycle time for 2014 and 2016.

Explanation of Solution

Core objectives and measures: Core objectives and measures are common through all organization. Five key core objectives are “increase customer retention, increase market share, increase customer satisfaction, increase customer acquisition and increase customer profitability”. Possible core measures for these objectives are “market share, number of new customers, ratings from customer satisfaction surveys, percentage of repeating customers, percentage growth of business from existing customers, individual and segment profitability and customer satisfaction surveys”.

Calculate actual velocity for 2014:

$\begin{array}{c}\text{Actual}\text{velocity}\text{=}\frac{\text{Actual}\text{production}}{\text{Production}\text{hours}\text{available}\text{for}\text{40}\text{workers}}\\ \text{=}\frac{\text{208,000}\text{units}}{\text{104,000}\text{hours}}\\ \text{=}\text{2}\text{units}\text{per}\text{hour}\end{array}$

Calculate cycle time for 2014:

$\begin{array}{c}\text{Cycle}\text{time}\text{=}\frac{\text{Time}\text{taken}}{\text{Units}\text{produced}}\\ \text{=}\frac{\text{60}\text{minutes}}{\text{2}\text{units}\text{per}\text{hour}}\\ \text{=}\text{30}\text{minutes}\text{per}\text{unit}\end{array}$

Calculate actual velocity for 2016:

$\begin{array}{c}\text{Actual}\text{velocity}\text{=}\frac{\text{Actual}\text{production}}{\text{Production}\text{hours}\text{available}\text{for}\text{40}\text{workers}}\\ \text{=}\frac{\text{234,000}\text{units}}{\text{104,000}\text{hours}}\\ \text{=}\text{2}\text{.25units}\text{per}\text{hour}\end{array}$

Calculate cycle time for 2016:

$\begin{array}{c}\text{Cycle}\text{time}\text{=}\frac{\text{Time}\text{taken}}{\text{Units}\text{produced}}\\ \text{=}\frac{\text{60}\text{minutes}}{2.25\text{units}\text{per}\text{hour}}\\ \text{=}26.67\text{minutes}\text{per}\text{unit}\end{array}$

b.

To determine

Calculate percentage of total revenue from new customers:

Explanation of Solution

Calculate percentage of total revenue from new customers during 2014:

$\begin{array}{c}\begin{array}{l}\text{Percentage of total }\\ \text{revenue from new customers}\end{array}\}\text{=}\frac{\text{Number}\text{of}\text{new}\text{customers}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{5,200}}{\text{208,000}\text{units}}\\ \text{=}\text{2}\text{.5}\text{\%}\text{or}\text{0}\text{.025}\end{array}$

Calculate percentage of total revenue from new customers during 2016:

$\begin{array}{c}\begin{array}{l}\text{Percentage of total }\\ \text{revenue from new customers}\end{array}\}\text{=}\frac{\text{Number}\text{of}\text{new}\text{customers}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{26,000}}{\text{234,000}\text{units}}\\ \text{=}11.1\text{\%}\text{or}\text{0}\text{.111}\end{array}$

c.

To determine

Calculate the percentage of satisfied customers.

Explanation of Solution

Calculate the percentage of satisfied customers for 2014:

$\begin{array}{c}\begin{array}{l}\text{Percentage of }\\ \text{satisfied customers}\end{array}\}\text{=}\frac{\text{Very}\text{satisfied}\text{customer}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{83,200}}{\text{208,000}}\\ \text{=}\text{40}\text{\%}\end{array}$

Calculate the percentage of satisfied customers for 2016:

$\begin{array}{c}\begin{array}{l}\text{Percentage of }\\ \text{satisfied customers}\end{array}\}\text{=}\frac{\text{Very}\text{satisfied}\text{customer}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{140,400}}{\text{234,000}}\\ \text{=}60\text{\%}\end{array}$

d.

To determine

Calculate value of market share.

Explanation of Solution

Calculate value of market share for 2014:

$\begin{array}{c}\text{Market}\text{share}\text{=}\frac{\text{Actual}\text{production}}{\text{Market}\text{size}\text{in}\text{units}\text{sold}}\\ \text{=}\frac{\text{208,000}}{\text{1,300,000}}\\ \text{=}\text{16\%}\end{array}$

Calculate value of market share for 2016:

$\begin{array}{c}\text{Market}\text{share}\text{=}\frac{\text{Actual}\text{production}}{\text{Market}\text{size}\text{in}\text{units}\text{sold}}\\ \text{=}\frac{\text{234,000}}{\text{1,300,000}}\\ \text{=}\text{18\%}\end{array}$

e.

To determine

Calculate percentage change in actual product cost for 2016.

Explanation of Solution

Calculate percentage change in actual product cost for 2016.

$\begin{array}{c}\begin{array}{l}\text{Percentage change in }\\ \text{actual product cost for 2016}\end{array}\}\text{=}\frac{\left(\begin{array}{l}\text{Hours}\text{of}\text{training}\text{during}\text{2014}\\ -\text{Actual}\text{cost}\text{per}\text{unit}\text{during}\text{2014}\end{array}\right)}{\text{Hours}\text{of}\text{training}\text{during}\text{2014}}\\ \text{=}\frac{\text{\$260}-\text{\$325}}{\text{\$325}}\\ \text{=}\text{20\%}\end{array}$

f.

To determine

Calculate percentage change in days of inventory for 2016.

Explanation of Solution

Calculate percentage change in days of inventory for 2016:

$\begin{array}{c}\begin{array}{l}\text{Percentage change in }\\ \text{days of inventory for 2016}\end{array}\}\text{=}\frac{\left(\begin{array}{l}\text{Days}\text{of}\text{inventory}\text{for}\text{2016}-\\ \text{Days}\text{of}\text{inventory}\text{for}\text{2014}\end{array}\right)}{\text{Days}\text{of}\text{inventory}\text{for}\text{2014}}\\ \text{=}\frac{\left(\text{7}\text{.8}-\text{15}\text{.6}\right)}{\text{15}\text{.6}}\\ \text{=}\text{50\%}\end{array}$

g.

To determine

Calculate the defective units as a percentage of total units produced.

Explanation of Solution

Calculate the defective units as a percentage of total units produced for 2014:

$\begin{array}{c}\begin{array}{l}\text{Defective units as a percentage}\\ \text{ of total units produced}\end{array}\}\text{=}\frac{\text{Number}\text{of}\text{defective}\text{units}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{13,000}}{\text{208,000}}\\ \text{=}\text{6}\text{.25\%}\end{array}$

Calculate the defective units as a percentage of total units produced for 2016:

$\begin{array}{c}\begin{array}{l}\text{Defective units as a percentage}\\ \text{ of total units produced}\end{array}\}\text{=}\frac{\text{Number}\text{of}\text{defective}\text{units}}{\text{Actual}\text{production}}\\ \text{=}\frac{\text{5,200}}{\text{234,000}}\\ \text{=}2.22\text{\%}\end{array}$

h.

To determine

Calculate the total hours of training.

Explanation of Solution

The total hours of training during 2014 is 260 hours and for 2016 is 1,040 hours.

i.

To determine

Calculate per production worker.

Explanation of Solution

Calculate per production worker for 2014:

$\begin{array}{c}\text{ Production worker}\text{per}\text{unit}\text{=}\frac{\text{Total}\text{worker}\text{suggestions}}{\text{Number}\text{of}\text{workers}}\\ \text{=}\frac{\text{104}}{\text{40}}\\ \text{=}\text{2}\text{.6}\text{worker}\text{per unit}\end{array}$

Calculate per production worker for 2016:

$\begin{array}{c}\text{ Production worker}\text{per}\text{unit}\text{=}\frac{\text{Total}\text{worker}\text{suggestions}}{\text{Number}\text{of}\text{workers}}\\ \text{=}\frac{312}{\text{40}}\\ \text{=}7.8\text{worker}\text{per unit}\end{array}$

j.

To determine

Calculate total revenue.

Explanation of Solution

Calculate total revenue during 2014:

$\begin{array}{c}\text{Total}\text{revenue}\text{=}\text{Actual}\text{production}\text{×}\text{Selling}\text{price}\text{per}\text{unit}\\ \text{=}\text{208,000}\text{units}\text{×}\text{\$195}\\ \text{=}\text{\$40,560,000}\end{array}$

Calculate total revenue during 2016:

$\begin{array}{c}\text{Total}\text{revenue}\text{=}\text{Actual}\text{production}\text{×}\text{Selling}\text{price}\text{per}\text{unit}\\ \text{=}\text{234,000}\text{units}\text{×}\text{\$195}\\ \text{=}\text{\$45,630,000}\end{array}$

k.

To determine

Identify the number of new customers during 2014 and 2016.

Explanation of Solution

The number of new customers during 2014 is 5,200 and for 2016 are 26,000.

2.

To determine

Provide strategic objective classified according to the four balance scorecard perspectives.

Explanation of Solution

Balanced Scorecard: Balanced scorecard is a management and planning strategy for organizational processes of defining the goals to be achieved, allocation of daily assignments on the basis of strategy, alignment of the projects on the basis of their priority and watchdog roles for its respective progress and achieving desired targets. Even though balances scorecards change from one firm to another firm, most have a combination of customer measures, measures of learning and growth, financial measures and internal business process measures.

Strategic Objective	Measure
Financial
Reduce unit cost	“Unit cost reduction in percentage”
Increase total revenue	“Revenue”
Develop new revenue	“Percentage of new revenues”
Customer
Increase customer satisfaction	“Percentage of very satisfied customers”
Increase customer acquisition	“Number of new customers”
Increase market share	“Market share”
Process
Decrease process time	“Cycle time/ velocity”
Decrease inventory	“Days of inventory”
Improve product quality	“Percentage defects”
Learning/Growth
Increase employee capability	“Training hours”
increase employee motivation	“Recommendations per worker”

Table (1)