Compute theoretical velocity and cycle time

Reference no: EM13948157

At the end of 2007, Everett Company implemented a low-cost strategy to improve its competitive position. Its objective was to become the low-cost producer in its indus- try and enhance its profitability. To lower costs, Everett undertook a number of lean improvement activities. Everett also adopted a Balanced Scorecard approach for its strategic performance management system. Now, after two years of operation, the presi- dent of Everett wants some assessment of the system's achievements. To help provide this assessment, the following information on one product has been gathered:

	2007	2008
Theoretical annual capacitya	192,000	192,000
Actual production and salesb	152,000	176,000
Production hours available (40 workers)	80,000	80,000
Postpurchase costs per unit	$20	$10
Scrap (pounds)	20,000	16,000
Materials used (pounds)	200,000	200,000
Actual cost per unit	$250	$200
Days of inventory	6	3
Number of defective units	9,000	4,000
Suggestions per employee	2	6
Hours of training	200	800
Selling price per unit	$300	$280
Number of new customersc	4,000	16,000
Market shared	20%	?

a. Amount that could be produced given the available production hours.

b. Amount that was produced given the available production hours.

c. The increase in total sales from 2005 to 2006 all came as a result of the new customers. In 2005, the new cus- tomers were responsible for sales of 4,000 units.

d. The total market increased by 20,000 units from 2005 to 2006.

Required

1. Compute the following measures for 2007 and 2008:

a. Theoretical velocity and cycle time

b. Actual velocity and cycle time

c. Percentage change in postpurchase costs (for 2008 only)

d. Labor productivity (output/hours)

e. Scrap as a percentage of total materials issued

f. Percentage change in actual product cost (for 2008 only)

g. Percentage change in days of inventory (for 2008 only)

h. Defective units as a percentage of total units produced

i. New customers per unit of output

j. Hours of training

k. Selling price per unit (as given)

l. Total employee suggestions

m. Percentage of revenue from new customers

n. Market share

o. Percentage change in sales revenue

2. For the measures listed in Requirement 1, list likely strategic objectives and their associated measures, classified according to the four Balanced Scorecard perspectives. Evaluate the success of the strategy. Would you like any additional information to carry out this evaluation? Explain.

3. Based on the results in Requirement 2, express Everett's strategy as a series of if-then statements. What does this tell you about Balanced Scorecard measures? Identify a measure that acts both as a lead and lag measure. Now, identify a measure that acts only as a lead measure. Finally, identify a measure that acts only as a lag measure. What does this tell you?

Reference no: EM13948157

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