Degree of difficulty of target achievement in the mid-1990s mobile corporation's marketing and refining (M&R) division

8-79 (Compensation tied to balanced scorecard) Degree of difficulty of target achievement in the mid-1990s mobile corporation's marketing and refining (M&R) division underwent a major reorganization and developed new strategic directions. In conjunction with these changes, M&R developed a balance scorecard around four perspectives: financial customer, internal business processes and learning and growth. Subsequently M&R linked compensation to its balanced scorecard metrics. To illustrate, all salaried employees in M&R's Natural Business Units received the following percentages of their competitive market salary:

Poor Performance within industry Average performance within industry Performance best in industry
Base Pay 90% 90% 90%
Award Based on corporate 1-2% 3-6% 10%
performance on financial metrics
Award based on performance on 0% 5-8% 20%
balanced scorecard metrics for the
M&R division and business unit 91-92% 98-104% 120%

The balanced scorecards included numerous metrics. M&R's financial metrics included return on capital employed and profitability and customer metrics included share of targeted segments of consumers and profitability of dealers. Internal business process metrics included safety and quality indices. Finally learning and growth metrics included an index of employees perceptions of the work climate at M&R

a. What are the advantages and concerns in linking compensation to a balanced scorecard generally?
B. Evaluate M&Rs approach to linking compensation to multiple measures including its system of assigning degrees of difficulty to achieving targets. In your response, consider the process that is involved in developing the compensation scheme.


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Why is the salary of a production worker capitalized while the salary of a marketing manager expensed?

7. Why is the salary of a production worker capitalized while the salary of a marketing manager expensed?


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The director of marketing for Eclipse Computer Co., Lori Keller, had the following discussion with the company controller, Deon Johnson

SA 22-1 The director of marketing for Eclipse Computer Co., Lori Keller, had the following discussion with the company controller, Deon Johnson, on July 26 of the current year:

Lori: Deon, it looks like I’m going to spend much less than indicated on my July budget.
Deon: I’m glad to hear it.
Lori: Well, I’m not so sure it’s good news. I’m concerned that the president will see that I’m under budget and reduce my budget in the future. The only reason that I look good is that we’ve delayed an advertising campaign. Once the campaign hits in September, I’m sure my actual expenditures will go up. You see, we are also having our sales convention in September. Having the advertising campaign and the convention at the same time is going to kill my September numbers.
Deon: I don’t think that’s anything to worry about. We all expect some variation in actual spending month to month. What’s really important is staying within the budgeted targets for the year. Does that look as if it’s going to be a problem?
Lori: I don’t think so, but just the same, I’d like to be on the safe side.
Deon: What do you mean?
Lori: Well, this is what I’d like to do. I want to pay the convention-related costs in advance this month. I’ll pay the hotel for room and convention space and purchase the airline tickets in advance. In this way, I can charge all these expenditures to July’s budget. This would cause my actual expenses to come close to budget for July. Moreover, when the big advertising campaign hits in September, I won’t have to worry about expenditures for the convention on my September budget as well. The convention costs will already be paid. Thus, my September expenses should be pretty close to budget.
Deon: I can’t tell you when to make your convention purchases, but I’m not too sure that it should be expensed on July’s budget.
Lori: What’s the problem? It looks like “no harm, no foul” to me. I can’t see that there’s anything wrong with this—it’s just smart management.

How should Deon Johnson respond to Lori Keller’s request to expense the advanced payments for convention-related costs against July’s budget?


Click here for the solution: The director of marketing for Eclipse Computer Co., Lori Keller, had the following discussion with the company controller, Deon Johnson

(Integrative Case 3: Encore International) In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success

Integrative Case 3: Encore International

In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Jordan Ellis had both. During 2012, his international casual-wear company, Encore, rocketed to $300 million in sales after 10 years in business. His fashion line covered the young woman from head to toe with hats, sweaters, dresses, blouses, skirts, pants, sweatshirts, socks, and shoes. In Manhattan, there was an Encore shop every five or six blocks, each featuring a different color. Some shops showed the entire line in mauve, and others featured it in canary yellow.

AND SO ON

Contrary to the conservative securities analysts, Jordan Ellis felt that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for the next 2 years and 6% thereafter. Ellis based his estimates on an established longterm expansion plan into European and Latin American markets. Venturing into these markets
was expected to cause the risk of the firm, as measured by beta, to increase immediately from 8.8% to 10%.

AND SO ON

Data Item 2012
Earnings Per Share $6.25
Price per share of common stock $40.00
Book value of common stock equity $60,000,000
Total common shares outstanding 2,500,000
Common stock dividend per share $4.00

TO DO
a. What is the firm’s current book value per share?
b. What is the firm’s current P/E ratio?
AND SO ON
f. Compare the current(2012) price of the stock and the stock values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Encore stock?


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Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales

P 6. Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales. DMI’s basic package of services includes the design of a mailing piece (either a Direct Mailer or a Store Mailer), creation and maintenance of marketing databases containing information about the client’s target group, and a production process that prints a promotional piece and prepares it for mailing. In its marketing strategies, DMI targets working women ages 25 to 54 who are married with children and who have an annual household income in excess of $50,000. DMI has adopted activity-based management, and its controller is in the process of developing an ABC system. The controller has identified the following primary activities of the
company:

Use database of customers Accounting
Service sales Mailer assembly
Deliver mailers to post office Process orders
Supplies storage Purchase supplies
Client follow-up Design mailer
Database research trends Building maintenance
Schedule order processing Processing cleanup
Personnel Mailer rework

Required
1. Identify the activities that do not add value to DMI’s services.
2. Assist the controller’s analysis by grouping the value-adding activities into the activity areas of the value chain shown in Figure 22-1.
3. State whether each non-value-adding activity is necessary or unnecessary. Suggest how each unnecessary activity could be reduced or eliminated.


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Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs

P 12–17: Software Associates

Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs. Humphrey Catalog is a client.

In preparing its bid for Humphrey, SA estimates its total labor cost for this project to be $222,500, broken down as follows:

Required:
a. Prepare a performance report for the Humphrey Catalog project.
b. Offer a plausible explanation for SA’s performance on the Humphrey project.

Click here for the solution: Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs

Case 6 Sigma Marketing Innovation in a Changing Environment

Case 6 Sigma Marketing Innovation in a Changing Environment

Synopsis: This case reviews the growth of a small, family-owned business, from a regional provider of generic printing services to a global provider of specialty advertising products. Throughout its history, Sigma Marketing has exhibited the uncanny ability to understand market opportunities and to adapt its strategic focus accordingly. As its marketing environment changes, Sigma Marketing gathers information from existing and potential customers to develop the most effective marketing strategy possible. Even in the face of changing technology, communication, and advertising methods, Sigma Marketing has managed to reinvent its mindset and strategies in order to remain successful.

AND SO ON

Questions for Discussion
1. Discuss potential key changes in technology, communications, and competition that Sigma will face in the future. Which will have the most impact on Sigma’s future marketing strategies?
2. Prepare a SWOT analysis for long-term strategic planning at Sigma Marketing.
3. Suggest some possible strategic initiatives that Sigma could pursue to continue its growth.

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Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program

PROBLEM 8-1. Determining the Profit-Maximizing Price [LO 1] Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program. The cable program's fee for selling the item is 20% of revenue. For this fee, the program will sell the calendar over six 10-minute segments in September.

Spencer's fixed costs of producing the calendar are $150,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $25.00 per unit. In addition, it will cost approximately $5.00 per unit to ship the calendars to customers.

Marsha Andersen, a product manager at Spencer, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:

Price: Quantity:
$79.99 15,000
$69.99 20,000
$59.99 30,000
$49.99 45,000
$39.99 65,000

Required:
a) Calculate expected profit for each price.
b) Which price maximizes company profit.

Click here for the solution: Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program

4-27 (Assigning marketing, distribution, and selling expenses to customers) Tetra Company’s cost system assigns marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue

4-27 (Assigning marketing, distribution, and selling expenses to customers) Tetra Company’s cost system assigns marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue. The new controller has discovered that Tetra’s customers differ greatly in their ordering patters and interaction with Tetra’s sales force. Because the controller believes Tetra’s cost system does not accurately assign marketing, distribution, and selling expenses to customers, she developed an activity-based costing system to assign these expenses to customers. She then identified the following marketing, distribution, and selling costs for two customers, Ashton and Brown: ASHTON BROWN Sales representative $9,000 $42,000 Service customers 15,000 110,000 Handle customer orders 1,000 12,000 Ship to customers 24,000 72,000 The following additional information is available: ASHTON BROWN Sales $430,000 $350,000 Cost of goods sold 220,000 155,000 a. Using the current cost system’s approach of assigning marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue, determines the operating profit associated with Ashton and with Brown. b. Using the activity-based costing information provided, determine the operating profit associated with Ashton and with Brown. c. Which of the two methods produced more accurate assignments of marketing, distribution, and selling expenses to customers? Explain.

Click here for the solution: 4-27 (Assigning marketing, distribution, and selling expenses to customers) Tetra Company’s cost system assigns marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue