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ACCA Applied Knowledge · Management Accounting · Performance measurement - application

Dalton Co sets a balanced scorecard target of increasing customer satisfaction from 80% to 90% by training staff and improving delivery processes. After a year, satisfaction is 85%, while profit has fallen because training costs rose by $120,000. Which statement best reflects the balanced scorecard approach?

The profit fall should be assessed together with the improvement in customer satisfaction. The balanced scorecard considers financial and non-financial perspectives and the long-term link between them, so neither profit nor satisfaction alone should decide whether the initiative succeeded.

  1. AThe initiative has failed because profit fell, which is the only measure that matters to shareholders
  2. BThe result should be judged only on customer satisfaction since the target was set there
  3. CThe fall in profit should be considered alongside progress in non-financial measures, as the scorecard looks at performance across several perspectives and the longer termCorrect
  4. DThe training cost should be excluded from the scorecard because it is not a customer measure

Explanation

The balanced scorecard links non-financial drivers to future financial results, so short-term profit reduction must be viewed alongside progress on customer satisfaction. Judging on profit alone ignores the other perspectives, and judging on satisfaction alone ignores financial results.

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