EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
2. Performance measures that are ratios or percentages present special dangers. A ratio can be increased either by increasing the numerator or by decreasing the denominator. Usually, the intention is to increase the numerator in the ratio, but a manager may react by decreasing the de-nominator instead. In this case (which actually happened), the manag-ers pulled telephones out of the high-crime areas. This eliminated the problem for the managers, but was not what the CEO or the city offi-cials had intended. They wanted the phones fixed, not eliminated.