managerial accounting chapter 12 problem 10 419440

Ch12 P10

Don't use plagiarized sources. Get Your Custom Essay on

Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page

PROBLEM 12 10. Economic Value Added and the Balanced Scorecard [LO 6,7,8] Spectrum Book Company has two divisions: The Brick and Mortar division sells books through more than 100 bookstores throughout the United States; the Internet division was formed 18 months ago and sells books via the Internet. Data for the past year are:

	Brick and Mortar Division	Internet Division

Total assets	$180,000,000	$17,200,000
Noninterest bearing current liabilities	7,800,000	2,800,000
Interest expense	1,400,000	465,000
Net income (loss)	30,900,000	(1,250,000)
Tax rate	40%	‘0’
Cost of capital	13%	15%

Required

a. Evaluate the two divisions in terms of economic value added (EVA).
b. Explain why it might be better to evaluate the Internet division in terms of a balanced scorecard rather than just using EVA.
c. Consider the customer and internal processes dimensions of the balanced scorecard. Suggest two measures for each dimension that would be appropriate for the Brick and Mortar division and two measures for each dimension that would be appropriate for the Internet division.
d. A strategy map diagrams the relationship across the dimensions of the balanced scorecard. Identify the potential links between the customer and internal processes dimensions you identified in part c.