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Finance & Accounting
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Balanced scorecard is a concept for measuring a company's activities in terms of its vision and strategies,to give managers a comprehensive view of the performance of a business.The maximum purchase price that should be acceptable should be less than or equal to the difference that Minnetonka is saving for not making the products themselves …

Introduction

Balanced scorecard is a concept for measuring a company's activities in terms of its vision and strategies, to give managers a comprehensive view of the performance of a business. The maximum purchase price that should be acceptable should be less than or equal to the difference that Minnetonka is saving for not making the products themselves. Any price of the bindings that takes the total cost above $ 900,000 should be unacceptable; since in that case, the company is better off making the product itself than to go for the purchase option. Hence, the maximum that the company can be willing to pay to purchase 10,000 pairs of bindings is $ 110,000. This means that the maximum purchase price per pair of bindings will be 110,000 / 10,000 = $11 per pair of bindings = $ 5.5 per binding. Since the company has invested capital in the business, that capital can not be used to achieve other gains that the company could have achieved had it not invested the capital in the business. The return that the business is generating on that capita is net operating profit after tax, while the return that could have been generated if the capital was not invested in the business is the second part of above equation. The difference will tell us whether the company is actually getting an economic value from the capital or not. ...
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