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Winter Department Store is located in the downtown area of a medium-sized city in East Africa. While the store had been profitable for many years, it is facing increasing competition from large national chains that have set up stores in the citys suburbs. Recently the downtown area has been undergoing revitalization, and the owners of Winter Department Store are somewhat optimistic that profitability can be restored. In an attempt to accelerate the return to profitability, the management of Winter Department Store is in the process of designing a balanced scorecard for the company. Management believes the company should focus on two key problems. First, customers are taking longer and longer to pay the bills they incur on the department stores charge card and they have far more bad debts than are normal for the industry. If this problem were solved, the company would have more cash to make much needed renovations. Investigation has revealed that much of the problem with late payments and unpaid bills is apparently due to disputed bills that are the result of incorrect charges on the customer bills. These incorrect charges usually occur because sales assistants enter data incorrectly on the charge account slip. Secondly, the company has been incurring large losses on unsold seasonal apparel. Such items are ordinarily resold at a loss to discount stores that specialize in such distress items. The meeting in which the balanced scorecard approach was discussed was disorganized and ineffectively led possibly because no one other than one of the vice presidents had read anything about how to put a balanced scorecard together. Nevertheless, a number of potential performance measures were suggested by various managers. These potential performance measures are listed below: Total sales revenue Percentage of salesclerks trained to correctly enter data on charge account slips Customer satisfaction with accuracy of charge account bills from monthly customer survey Sales per employee Travel expenses for buyers for trips to fashion shows Average age of accounts receivables Courtesy shown by junior staff members to senior staff members based on surveys of senior staff Unsold inventory at the end of the season as a percentage of total cost of sales Sales per square foot of floor space Percentage of suppliers making just-in-time deliveries Quality of food in the staff cafeteria based on staff surveys Written-off accounts receivables (bad debts) as a percentage of sales Percentage of charge account bills containing errors Percentage of employees who have attended the citys cultural diversity workshop Total profit Profit per employee. REQUIRED 1. As someone with more knowledge of the balanced scorecard than almost anyone else in the company, you have been asked to use that knowledge to contribute to the improvement of the performance of the company. Explain how you will use the given performance measures to measure and improve the performance of the company. (15 Marks). 2. (a) Suppose that the turnover of the company improves but the total profit and the profit per employee performance measures do not improve. Explain why this might happen (5 marks). (b) Suppose that the performance measures for the average age of accounts receivable, bad debts, and unsold inventory improve, but total profits do not. Explain why this might happen. Assume in your answer that the explanation lies within the company (10marks)

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