Essay about Maverick Lodging Case

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DEPARTMENT OF ACCOUNTANCY
UNIVERSITY OF ILLINOIS
MEMORANDUM

TO: Professor Wu
FROM: Minghao Tang, AE5
DATE: March 30, 2014
SUBJECT: MAVERICK LODGING CASE

Year 1999 Analysis
In 1999, the Maverick Lodging company implements balanced scorecard to establish a measurement system and control the hotel level management. The balanced scorecard has several attributes, such as tracking financial performance, tracking nonfinancial measures and communicating franchisees and owners objectives of growth. For financial performance, according to Exhibit 7, the Maverick Courtyard has 3.77% growth rate, Maverick Fairfield Inn has 2.22% growth rate and Maverick Residence Inn has 3.5% growth rate. For flow-through flexible budget, both Maverick …show more content…
After one fiscal year of operating, the management gets the actual data of revenue and expense. The management would then make reforecast target, which is the flexible budget, to measure the performance of each hotel. For the variable costs and the variable revenues, the company uses drivers and actual quantity to determine the value of flexible budget. However, the fixed elements and the uncontrollable expenses stay the same as original budget. After the calculations, the company can acquire controllable profits and house profits for both actual and flexible budgets. Based on the results, top management calculates the percentages of actual controllable profit divided by reforecast controllable profit. According to Exhibit 3, the company firstly determines whether the performance is low, base or high by viewing house profit percentage. House profit percentage that is lower than 90% indicates low performance, 90%-105% indicates basic performance and higher than 105% indicates high performance. After determine level of performance, the company uses the flexible budget controllable profit percentages to determine the color rankings of managers.
Changes for Balanced Scorecards
According to the analysis above, the scorecard does not align with the company’s overall objectives. As a result, the company can make some changes to modify the scorecards. Firstly, the company should simplify the scorecards procedure
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