Please use template, thank you.
Module 6 Exercises Problem 1 The following is a list of terms related to performance evaluation. Match each of the terms to their descriptions. Terms Association Descriptions 1. Balanced Scorecard The difference between total actual costs and total standard costs. 2. Variance An efficient level of performance that is attainable under expected operating conditions. 3. Learning and growth perspective An approach that incorporates financial and nonfinancial measures in and integrated system that links performance measurement and a company's strategic goals. 4. Nonfinancial measures A viewpoint employed in the balanced scorecard to evaluate how well a company develops and retains its employees. 5. Customer perspective An evaluation tool that is not based on dollars. 6. Internal standards A viewpoint employed in the balanced scorecard to evaluate the company from the perspective of those people who buy and use its products or services. 7. Ideal standards An optimum level of performance under perfect operating conditions. 8. Normal standards A viewpoint employed in the balanced scorecard to evaluate the efficiency and effectiveness of the company's value chain. NOTE: You will associate each term to its description by using the appropriate letter reference of the description in the center column. Problem 2 Vorteck Inc. manufactures snowsuits. Vorteck is considering purchasing a new sewing machine at a cost of $2.5 million. Its existing machine was purchased five years ago at a price of $1.8 million six months ago; Vorteck spent $55,000 to keep it operational. The existing sewing machine can be sold today for $260,000. The new sewing machine would require a onetime, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $390,000 2 400,000 3 411,000 4 426,000 5 434,000 6 435,000 7 436,000 The new sewing machine would be depreciated according to the decliningbalance method at a rate of 20%. The salvage value is expected to be $380,000. This new equipment would require maintenance costs of $95,000 at the end of the fifth year. The cost of capital is 9%. Use the net present value method to determine whether Vorteck should purchase the new machine to replace the exiting machine, and state the reason for your conclusion Template: EXERCISE 11-17 1. 2. 3. 4. 5. 6. 7. 8. Balanced scorecard Variance Learning and growth perspective Nonfinancial measures Customer perspective Internal process perspective Ideal standards Normal standards EXERCISE 12-3 Investment in new equipment.............. Disposal of old equipment............... Additional training required................. Net initial investment required............. Calculation of net present value: Year Cash flows Discount Factor, 9% 1 2 3 4 5 6 7 Amount Present Value Maintenance Net cash flows from operations: Terminal salvage Present value of cash inflows Initial investment Net Present Value 5 7
