Pleasanton Company produces three products: X, Y, and Z. The income statement for 2014 is as follows:
Pleasanton Corporation has a target ROI of 17 percent.
a. Calculate the following amounts for each division: ROI, Residual Income, EVA
b. The Mixing Division has an opportunity to invest in a major new project with an expected return of 16%. The division manager’s performance is assessed based on division ROI. Would the company overall benefit from moving forward with this project? How does this affect the manager’s decision on whether to proceed?
4. Pleasanton Industries has identified list of financial and nonfinancial performance indicators:
Average call wait
Average customer survey rating
Employee turnover ratio
Job offer acceptance rate
Net profit margin
New product ROI
Number of complaints
Number of defects reported
Service error rate
Time to market on new products
Year over year revenue growth
a. Assign the identified metrics to Pleasanton’s four balanced scorecard categories of (1) Financial Success, (2) Customer Satisfaction and Brand Improvement, (3) Business Process Improvement, and (4) Learning and Growth of Motivated Workforce.
b. Is there value in tracking all these different measures, rather than a single financial measure such as ROI or EVA?