What are the pros and the cons of eva as a performance

Question

Performance Measurement

INSTRUCTIONS

The assignment is based on the case Wyaderm Pharmaceuticals, in your coursepack (Performance Measurement). The background readings for the case are summarised in Chapters 9 and 10 of the textbook: K. A. Merchant & W. A. Van der Stede, Management Control Systems - Performance Measurement, Evaluation and Incentives, 3rd Edition (distributed in May/June 2015).

2. This is an individual assignment, so we should regard it as a "virtual exam". Please, do not ask questions on the course discussion board. Do not ask questions directly to the professor, unless you need to clarify the text.

3. Questions are specific, please answer briefly and to point. Prepare maximum 5 pages (+cover) to summarize your conclusions and calculations. Please state your assumptions clearly, if any.

IMPORTANT NOTE

1) Using the worksheet attached determine, what are the appropriate figures for:

a) 2000 EVA for the North American Dermatology division;

b) 2000 EVA bonus payment for a manager earning $200,000 (assuming 100% linkage to EVA).

I intentionally left some numbers and some formulas in the spreadsheet.

2) Based on your calculations for Question 1, what recommendations would you make to Védrine concerning the decisions to be made in January, 2001?

3) In general terms, how do you evaluate the effectiveness of the incentive system at Wyaderm Pharmaceuticals? Which changes would you suggest if any?

4) What are the pros and the cons of EVA as a performance measures?

Attachment:- Vyaderm-worksheet.xls

Answer 1

In this assignment, you have to at first read and review the case named ‘Wyaderm Pharmaceuticals’ regarding Performance Measurement. On the basis of the case and information provided, respond to each question. 1) By using the worksheet attached find out, what are the suitable figures for: a) 2000 EVA for North American Dermatology division. b) 2000 EVA bonus payment for the manager earning $200,000 (supposing 100% linkage to EVA). 2) On the basis of your computations for above, what proposals would you make to Védrine regarding the decisions to be made in January, 2001? 3) In general terms, illustrate how do you assess the efficiency of the incentive system at Wyaderm Pharmaceuticals? Which changes would you propose if any? 4) Write down the pros and the cons of the EVA as a performance measures?