Question

Section B
Micky LLC is a company manufacturing and selling a wide range of automotive components to the major vehicle assemblers. The company has experience rapid growth over the last 10 years and is profitable although cash flow is tight. The performance of each business units and employees are measured based on profitability and number of components sold. Performance measures makes comparisons between actual and budget performance using budgets.
Kate the managing director of Micky LLC had attended a management conference, where she received with a basic understanding of use of Balanced Scorecard as a tool for performance measures by many successful companies. As the internal auditor of the company Kate had requested you to prepare a report.

Requirement 01:
Prepare a report
a. Evaluating the existing budgetary control used by Micky LLC

(maximum word limit – 200)

b. Explaining the concept of ‘Balance Score Card’ and recommend with reasons, the performance measures based on the difference perspectives that could be used to measure the performance of Micky LLC

(maximum word limit – 600)

Answer 1

a) Existing budgetary control of micky LLC is : Feedback control :

It is reaction after action has taken place, so there is chance of errors if we want to take corrective action. It simply based on evaluation of actual figures with the budgeted figures. Control reports are part of this budgetary control.

b) Balanced Scorecard:

Balanced scorecard is a set of financial and non financial set of Mesures relating to a company's critical success factors. it is an approach which provides info to management to assist in strategic policy formation and achievement. It emphasises= the need to provide the user with a set of info which addresses all relevant areas of performance in an objective and unbiased manner. As a management tool, it helps companies to assess overall performance, improve operational processes and enable management to developed better plans for improvements. It offers managers a balanced view of their organization upon which they can base real change.

Major components are:

1. Customer perspective: How do customer view us?:

2. Internal perspective: At what must we excel?

3.innovation and learning prospective: How do we continue to improve and create value?

4.Financial perspective.: How do we look to shareholders?

Since the Balanced scorecard is intended to improve long term performance, mangers may invest in Resources needed in The short run but this should not effect business unit's performance.

the ultimate result of using this approach should be an approved long term financial performance. Since it impacts on financial and non financial measures, it should discourage the short measures.