Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 5 Currently, Katie White (retail customers manager) and Jules De Martino (corporate customers manager) have their performance assessed based on how much profit/loss is

image text in transcribedimage text in transcribed

Question 5 Currently, Katie White (retail customers manager) and Jules De Martino (corporate customers manager) have their performance assessed based on how much profit/loss is made with their customers' loans and savings activities, but this has led to many disagreements. Based on figures from the previous year, the corporate customers' loans and savings activities have generated a profit of $124 million whereas the retail customers' loans and savings activities have generated a loss of $84 million. Jules is very happy with this outcome, but Katie argues Jules is lending money from her retail customers to his corporate customers. Table 5 - RRB loans and savings activities Retail Customers Corporate Customers All Customers $75 $ 1,925 $2,000 $1,500 $500 $2,000 Values in million dollars Assets Loans to customers Liabilities Deposit from customers Interest income Loans (8%) Interest expense Deposits (6%) Profit/Loss with customers $6 $154 $ 160 $90 ($84) $30 $124 $ 120 $40 RRB board is discussing implementing fund transfer pricing (FTP) for addressing Katie's concern about her customers funding Jules' activities. However, Jules argues implementing an arbitrary FTP rate will make the retail and customer managers performance evaluation too subjective. There has been some discussion in RRB board regarding implementing a Balanced Scorecard (BSC). Required a) Based on the figures from the previous year, what would be the adjusted profit/loss with retail customers and corporate customers if RRB set an FTP rate of 8% and which manager would benefit from this decision and why? (FTP, 10 marks) b) Is Jules correct on his statement that implementing an FTP rate will make the retail and customer managers performance evaluation too subjective? (Subjective performance evaluation, 10 marks) c) If the RRB board implements a BSC, recommend a measure for each one of the four perspectives and justify why you have selected such measures. (Chapter 20, 10 marks) Question 5 Currently, Katie White (retail customers manager) and Jules De Martino (corporate customers manager) have their performance assessed based on how much profit/loss is made with their customers' loans and savings activities, but this has led to many disagreements. Based on figures from the previous year, the corporate customers' loans and savings activities have generated a profit of $124 million whereas the retail customers' loans and savings activities have generated a loss of $84 million. Jules is very happy with this outcome, but Katie argues Jules is lending money from her retail customers to his corporate customers. Table 5 - RRB loans and savings activities Retail Customers Corporate Customers All Customers $75 $ 1,925 $2,000 $1,500 $500 $2,000 Values in million dollars Assets Loans to customers Liabilities Deposit from customers Interest income Loans (8%) Interest expense Deposits (6%) Profit/Loss with customers $6 $154 $ 160 $90 ($84) $30 $124 $ 120 $40 RRB board is discussing implementing fund transfer pricing (FTP) for addressing Katie's concern about her customers funding Jules' activities. However, Jules argues implementing an arbitrary FTP rate will make the retail and customer managers performance evaluation too subjective. There has been some discussion in RRB board regarding implementing a Balanced Scorecard (BSC). Required a) Based on the figures from the previous year, what would be the adjusted profit/loss with retail customers and corporate customers if RRB set an FTP rate of 8% and which manager would benefit from this decision and why? (FTP, 10 marks) b) Is Jules correct on his statement that implementing an FTP rate will make the retail and customer managers performance evaluation too subjective? (Subjective performance evaluation, 10 marks) c) If the RRB board implements a BSC, recommend a measure for each one of the four perspectives and justify why you have selected such measures. (Chapter 20, 10 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Edgerston Audit

Authors: Don Akenson

1st Edition

0802709915, 978-0802709912

More Books

Students also viewed these Accounting questions