Choosing Performance Measures Jen and Barry Opened an Ice Cream Shop in Eugene.It

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The Answer is Solution to Choosing Performance Measures (20 minutes)
Cleanliness and customer service are important to the success of the ice cream shop.The advantage of using cleanliness and customer service as performance measures is to motivate managers to make the business appealing to customers.Customers will be more likely to return and frequent other outlets of the company.Another advantage of using cleanliness and customer service as performance measures is their controllability by the manager.The disadvantage of using cleanliness and customer service as performance measures is that managers may ignore the costs of providing customer service.Without some measure of cost or profit as part of the manager's performance measure,a manager will be less likely to make the appropriate cost/benefit trade-off.
The benefit of using profit as a performance measure is that profit tends to include all aspects of operating the business.To improve profit,the manager should also be motivated to improve customer service because profit will increase with satisfied customers.If revenues and costs are accurately measured,then managers will make the appropriate cost/benefit trade-offs if evaluated on profit.One disadvantage of using profit as a performance measure is that profit is not completely controllable by the manager.There are uncontrollable environmental factors,such as the economy of Portland,that affect profit.Also,revenues and costs may not be appropriately measured in the short-run.If costs used to calculate profit don't reflect the opportunity cost,the manager may be motivated to make inappropriate decisions,such as postponing maintenance.

Choosing Performance Measures Jen and Barry Opened an Ice Cream Shop in Eugene.It

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