1.

AC2105 Tut 6
Done by: Group 5 (Cynthia, Cindy,
Jameson, Huizhen, Jacky, Jiake)

Prepared for: Prof Chan-Ng Ai Lin

Q1) Describe each of the
managers in terms of being
responsible for a cost, profit or
investment center and possible
performance measures for
each manager.
 Maple Way Golf Course: not a profit-oriented company but a
private club owned by members, hence it aims to provide good service to its
members rather than make profits

Eric Olson: Jennifer Jones: Edwin

Moses:

General manager responsible Manager of the golf course and Manager of the restaurant.
for all the operations of the golf responsible for its maintenance.
course and other facilities

Mabel Smith: Wanda Itami: Jake Reece:

Head golf professional and
responsible for golf lessons, the
golf shop, and reserving times
for starting golfers on the
course.
Manager of the swimming pool Manager of golf carts rented
and family recreational activities. to golfers.
3
 Maple Way Golf Course
Eric Olson:
General manager responsible for
all the operations of the golf
course and other facilities
Responsibility center: Profit center
Responsible for operations of golf course and other
facilities = has control over pricing/revenue and
cost = hence has control over profit
Performance measures:
1. Members’ satisfactions and complaints
2. % operational golf courses relative to total golf
courses
3. Operating hours of facilities
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 Maple Way Golf Course

Responsibility center: Cost center

Responsible for ensuring golf course is well-

Jennifer maintained for golf club members to use = has control
Jones: over costs of maintenance

Performance measures:
1. Actual cost vs Budgeted cost
Manager of the golf course and
2. Members’ satisfaction
responsible for its maintenance.
3. No. of complaints

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 Maple Way Golf Course
Responsibility center: Profit Center

Responsible for the restaurant’s costs (e.g. kitchen

and service staff salaries, food ingredients,
equipment etc.) and revenue (e.g. price and quality of
Edwin food) = has control over profit of the restaurant
Moses:
Performance measures:
1. Restaurant operating hours
2. Customer satisfaction
Manager of the restaurant. 3. Employee morale
4. Average seat turnover rate

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 Maple Way Golf Course

Responsibility center: Profit center

Responsible for golf lessons, golf shop and time slots for
new golfers = has control over revenue and costs from golf
shop and lessons = hence has control over profits
Mabel Smith:
Performance measures:
1. Targeted sales volume
Head golf professional and
2. Customer satisfaction
responsible for golf lessons, the
golf shop, and reserving times 3. No. of new signups
for starting golfers on the 4. Operating hours of golf shop
course.

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 Maple Way Golf Course
Responsibility center: Cost center
Responsible for swimming pool and family activities =
has control over costs incurred for the pool and
activities

Wanda Itami: These services are likely free for those who have paid
for membership. Wanda has no control over price of
membership = no control over revenue

Manager of the swimming pool

and family recreational activities.
Performance measures:
1. Actual cost vs budgeted costs
2. No. of customer complaints
3. Operating hours of swimming pool

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 Maple Way Golf Course

Responsibility center: Investment center

Responsible for purchasing and maintaining golf carts = has
Jake Reece: control over costs and revenue from golf cart rental, has
decision rights to purchase assets (golf carts) = control over
profits and assets

Manager of golf carts rented

to golfers.
Performance measures:
1. ROI
2. Rate of rental: number of rental and time period of
rental

https://docs.google.com/document/d/1nsNn3d23O3oPIyrkyl4bLT7jWL00sn
O4KzLJtSd_b-g/edit 9
Q2a) What type of
responsibility center would be
appropriate for a Café&Meal in
a Muji store?
Cost center. The main intention of setting up
Café&Meal is to attract customers through
providing them with a shopping experience
that they cannot get online. Through this cafe,
they hope to increase sales for other
departments. There is a possibility that the cafe
might not be able to make profit itself and will
likely to suffer losses. With this rationale, it is a
cost center where Café&Meal seeks to provide
best quality experience to shoppers at lowest
cost.

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Q2b) The GM of Muji would like to
evaluate the profitability of a
Café&Meal café within the store.
What costs could be traced directly
to the café? What costs, if any,
should be allocated to the café?
 Directly Traceable Cost
Direct Material:
Ingredients
- Coffee beans, food
Direct labour:
Café staff costs
- Chef, Service Crews
Allocated Cost
Overhead costs:
- Rental (1,300 sq ft)
- Utilities
- Advertising & Marketing
(assuming that Muji markets itself as a
brand and part of it includes Café&Meal)
- Depreciation, if any
- HQ costs
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Q2c) Now assume that Muji wants
to allocate the costs of the café to
all of the departments, such as
Baby and Kids wear, Clothes,
Household and Lifestyle, within a
Muji store. Are there any potential
issues with allocating the café
costs across the store?
 1. Controllability Issue
- Muji is allocating costs that the other departments have no
control over.
Eg. Ingredients cost, café employees, equipments used in
café
- Effects: it will affect the profitability of other departments
which also affects performance evaluation of managers in
the other departments.
- It is thus unfair to allocate such to other
segments as they do not use those expenses.
- The café is there to serve the customers and not
to serve the different departments, as such it is
weird to allocate café cost to the different
departments.

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 2. Measurement Issue

- Hard to keep track of the degree of influence that the

café has on the depts.
Eg. Some customers may head to Muji just for a meal,
some may not have bought anything from the café but
bought something from the shop.

- Staff costs might be hard to justify the allocation if the

café staff only works in the café only. If café staff works
rotating jobs which involves other segments, it might be
possible to allocate such cost to them.
Eg. Shift time

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Q5(a) Suggest and explain a business
strategy that Cassie should adopt for
CHPL.

Discuss two strategic factors that Cassie

should consider with regards to venturing
into space-saving furniture business
Possible Business Strategy 1

Differentiation Strategy
- Influx of interior design companies offering
personalised services
- CHPL has to differentiate themselves by seeking
innovative and creative products
- People likely undertake renovation works for the
long haul. Likely wouldn’t mind paying a premium
for higher quality products
- Increase in customers’ complaints about poor
quality shows how customers are particular about
the quality

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Possible Business Strategy 2

Cost Leadership
- Many new interior design companies
- Customers will likely compare across
companies to find the best quotes
- CHPL has to keep costs attractive to
retain their customer base
- Has their own carpentry factory, could
leverage on that to keep costs low
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Strategic Factors

Internal - Manufacturing
1) Whether CHPL’s manufacturing team
has the capabilities, knowledge or
expertise in relation to designing and the
making of space-saving furniture (e.g.
where to source for materials, storage
space, etc.)

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Strategic Factors

Internal - Sustainability
1) Can this new line of furniture ensure
profitability in the long run? Or the
preference for space-saving furniture is
just a trend that will not carry on?

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Strategic Factors

Internal - Employees
1) Are employees aligned with this new
idea? Motivated to do engage in this
change?
2) How can the company encourage
employees?

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Strategic Factors

Internal - Marketing
1) Expansion into the online retail space -
does the marketing team have the
capabilities to do so?
2) How can CHPL attract customers online?

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Strategic Factors

External - Competitors
1) Competition in business of space-saving
furniture (e.g. IKEA, strong presence
worldwide and large economies of scale)

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Strategic Factors

External - Customers
1) Does the customer base of CHPL really
want space-saving furniture?

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Q5(b)Using your knowledge of agency
theory, responsibility accounting and
organisational architecture framework, for
each of the four divisions:

(i) Identify the key weakness/problem that

each of the four divisions face.
Sales Division
● Compensated based on “fixed salary + bonus based on
meeting sales budget”

● “Adopts participative budget approach” → Actively

involved in budget creation process

Motivated to:

○ Set a lower sales budget so it is easier to meet the

sales budget to get bonus

✓ Agency Problem

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Interior Design Division

● Decision rights - Control over interior design services

provided

● Paid “fixed remuneration”

○ NO LINK among decision rights, performance measures & reward system

➢ NOT be motivated to:

● Produce quality designs → Increase no. of amendments

✓ AGENCY PROBLEM

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Carpentry Service Division

● Decision rights - Purchase of raw materials &

manufacturing of furniture

● Paid “fixed remuneration”

○ NO LINK among decision rights, performance measures &
reward system

○ NO incentive to:

➢ Save costs for the company / Source for quality

materials

➢ Manufacture quality furniture

✓ AGENCY PROBLEM
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Renovation Service Division

● Decision rights - Purchase of raw materials &

renovation works

● Paid “fixed remuneration”

○ NO LINK among decision rights, performance measures &
reward system

○ NO incentive to:

➢ Save costs for the company / Source for quality

materials

➢ Put in extra effort to ensure quality renovation works

✓ AGENCY PROBLEM
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Q5(b)Using your knowledge of agency
theory, responsibility accounting and
organisational architecture framework, for
each of the four divisions:

(ii) Suggest and explain an appropriate

responsibility centre.
Responsibility Centers

Divisions Decision Rights Responsibility

Centers

Sales Sales Revenues

+ Revenue Center
Costs of preparing for
home living exhibitions

Costs of preparing for home living exhibitions

● Not a major portion of total costs of the company

○ NOT Profit Center

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 Responsibility Centers
Divisions Decision Rights Responsibility
Centers

Interior Design Cost of interior design Cost Center

services

Carpentry Services Purchase of Raw

Materials
Only has
+ Cost Center
control over
Manufacturing of
costs.
Furniture
No control
Renovation Services Purchase of Renovation over
Materials Cost Center revenue.
+
Renovation Works

● “Sales team will provide a price quote…”

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Q5(b)Using your knowledge of agency
theory, responsibility accounting and
organisational architecture framework, for
each of the four divisions:

(iii) Identify two(2) appropriate

performance measurements for each of
the four divisions.
OA FRAMEWORK

What makes a good

performance evaluation system?

✓ Performance measures linked to CSFs

✓ Controllability

✓ Data integrity of data collected for

performance evaluation

✓ Cost vs. Benefits

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Possible Performance Measures

Divisions CSFs + Controllability Performance Measures

Sales Average no. of customers

Price, Discounts, Promotions acquired per home living
+ exhibitions
Quality Customer Service
Comparing Actual vs.
Budgeted Customer
Acquisition Cost

Quality of Customer Service

Interior Design Quality Customer Service Customer Satisfaction

+
Quality Interior Designs Average no. of amendments

% of Interior Designs w/o

amendments
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Possible Performance Measures

Divisions CSFs + Controllability Performance Measures

Comparing Actual costs vs.

Quality Furniture Budgeted costs
Carpentry Services +
Costs savings from purchase No. of customer complaints in
of raw materials terms of returns, reworks, etc.

Amount of internal & external

failure costs

Comparing Actual costs vs.

Quality Renovation Works Budgeted costs
Renovation Services +
Costs savings from Renovation No. of customer complaints in
Materials terms of returns, reworks, etc

Amount & time spent for

renovation reworks 37
Q5(b)Using your knowledge of agency
theory, responsibility accounting and
organisational architecture framework, for
each of the four divisions:

(iv) Propose a compensation plan for

Jennifer and her sales team, the interior
designers, Uncle Jack and Tom.
 Compensation plans - Sales Division

Performance Measures
Jennifer & her sales team - Control over Sales Average no. of
Revenue customers acquired per
home living exhibitions
● Fixed salary + Bonus based on Profit Margins / No. of customers
acquired Comparing Actual vs.
Budgeted Customer
○ Motivates sales representatives to: Acquisition Cost

■ Hit company’s sales targets Quality of Customer

Service
■ Ensure price discounts given are reasonable
Profit Margins
 Compensation plans - Interior Design Division

Interior Designers - Control over interior design Performance Measures

services provided Customer Satisfaction

● Fixed salary + bonus based on customer satisfaction level Average no. of

amendments
○ Costs is dependent on no. of amendments
% of Interior Designs w/o
○ Motivated to: amendments

➢ Provide quality interior design services

➢ Reduce average no. of amendments
 Compensation plans - Carpentry Services Division
(CSD)

Uncle Jack (Head of CSD) - Control over purchase of RM Performance Measures

● Fixed salary + bonus based on meeting budgeted costs Comparing Actual costs
vs. Budgeted costs
○ Motivated to:
No. of customer
○ Source for low costs raw materials complaints

○ Ensures external failure/internal failure costs is low Amount of internal &

(e.g. sourcing quality materials) external failure costs

■ Reduce customer complaints

 Compensation plans - Renovation Service Division (RSD)

Tom (Head of RSD) - Control over purchase of RM + Renovation

Works
● Fixed salary + bonus based on meeting budgeted costs + No. of customer
complaints/Renovation reworks
Performance Measures
○ Motivated to:
Comparing Actual costs
■ Ensure renovation cost is within budget vs. Budgeted costs

■ Provide quality renovation works No. of customer

complaints

Amount & time spent for

renovation reworks
Q6) Develop a strategy map of the
strategic objectives, as well as potential
BSC measures.
Question: Why is the bread noisier than the coffee?

44
BreadTalk Corporate Video

https://www.youtube.com/watch?v=PHkbJdMHv5Q

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Social Sustainability

46
47
Technological Advancement

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49
Risk Management

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51
Consolidated Strategy Map

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Balanced
Scorecard (BSC)
 Financial

Strategic
Measures Targets Initiatives
Objectives
● Increase in ● % increase in ● Declined by 3.2% ● Expansion to
revenue; sales; from S$306.9 new market in
● Reduction in ● Cost per unit million in FY2016 Myanmar and
cost; to $297.2 million setup of more
● Return on in FY2017. Target shops in
investment for the year Indonesia and
FY2018 would be Thailand
to increase by
5%

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 Customer

Strategic
Measures Targets Initiatives
Objectives
● Increase in ● Survey customer ● 80% good or ● Customised
customer satisfaction; better customer store size and
satisfaction; ● Market share rating; layout;
● Better service & ● 80% good or ● Setup of
product quality; better Customer
● Better branding/ impression Experience
reputation rating through Department;
market survey; ● Social media
● Market research campaigns
on the market
share of
Breadtalk as
opposed to
competitors
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 Internal Processes

Strategic
Measures Targets Initiatives
Objectives
● Competent & ● Hygiene ● Targets ● Internal and 3rd
motivated standard issued standard “A” for party checks on
employees; by government cleanliness food safety;
● Innovation ● New types of ● 2 types of new ● Quality, Service
(appearance); bread bread every and Cleanliness
● Strengthen introduced month (QSC) audits;
internal ● Awards for ● Achieve World ● Performance
processes; bakery Branding evaluations and
● Enhanced ● Queuing time Awards’ “Brand employment
productivity of the year” engagement
● Reduce queuing survey
time by 30%

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 Learning & Growth

Strategic
Measures Targets Initiatives
Objectives
● Technology ● No. of ● Obtain ● Electronic
advancement; technology innovation system that
● Training; advancements awards allows real-time
● Risk in place ● All employees to tracking of
identification ● Training hours in finish elearning preparation of
and skill course bread
management development; ● Online training
framework for Breadtalk
rewards
programme

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 Sustainability

Strategic
Measures Targets Initiatives
Objectives
● Social ● Amount of food ● 50% decrease in ● Employment
sustainability; wastage food wastage engagement
● Risk ● No. of food ● Zero food safety survey;
management; safety incidents; incidents at ● Stringent
● Environmental ● Use of BreadTalk and supplier
sustainability biodegradable Toast Box selection:
materials outlets; ISO22000
● 80% use of standards;
biodegradable ● Increased use of
materials biodegradable
(currently 70%) packaging
materials

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Appendices for Strategy Map

1. Breadtalk strategy- https://www.asiaone.com/business/how-

breadtalks-strategy-earns-38mil-6-months
2. SWOT- https://www.marketing91.com/swot-analysis-
breadtalk/
3. BreadTalk Sustainability Report-
http://breadtalk.listedcompany.com/newsroom/20180417_172
937_5DA_8ESADUT0B8YJ5YRC.1.pdf
4. Technology Advancement-
https://www.straitstimes.com/singapore/breadtalk-hopes-to-
win-back-trust-with-new-concept
5. Staffs - http://hrmasia.com/breadtalk-group-cream-of-the-
crop/
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Thank you!