ACIS 2116 Chapter 12 PowerPoints Spring 2009

ACIS 2116 Chapter 12 PowerPoints Spring 2009 -...

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Decentralization and Performance Evaluation ACIS 2116 Chapter Twelve
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A Decentralized Organization Decision making is spread throughout the organization. Managers at various levels make important decisions relating to their area of responsibility.
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Benefits of Decentralization Top management - can focus on long- range planning Lower-level managers: Gain experience in decision-making Increased job satisfaction May have better information (closer to the problem) Can make decisions more quickly
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Disadvantages of Decentralization Lower-level managers: May not see “big picture” May not act in best interest of the company as a whole To start with, may not be adequately trained in decision-making Lack of coordination and communication Difficult to spread innovative ideas
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Responsibility Accounting To hold managers responsible for only those things they can control. Important in a decentralized organization.
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Cost, Revenue, Profit, and Investment Centers Responsibility Centers Cost Center Profit Center Investment Center Revenue Center
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Cost Center Manager has control over costs, but not over revenues or investment funds. Examples: Manufacturing facilities. Service departments (purchasing, accounting, general administration, legal, and personnel.) Cost center managers evaluated based on how well costs are controlled.
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Revenue Center Manager has control over revenues generated but not over costs incurred. Examples: Sales department manager
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Profit Center Manager has control over both costs and revenues, but no control over investment funds. Revenues Sales Interest Other Costs Mfg. costs Commissions Salaries Other Examples: Store manager, Hotel manager
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Investment Center Manager has control over costs, revenues, and investments in property, plant and equipment. Like a separate business – can be called Strategic Business Unit (SBU) Corporate Headquarters Example: A division or group within a large company
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Responsibility Centers Cost Centers Investment Centers Clothing Product Manager Bottling Plant Manager Warehouse Manager Distribution Manager Sauces Product Manager Party Items Product Manager Operations Vice President Finance Chief Financial Officer Legal General Counsel Personnel Vice President Hokie Corporation Corporate Headquarters President and CEO
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Responsibility Centers Profit Centers Clothing Product Manager Bottling Plant Manager Warehouse Manager Distribution Manager Sauces Product Manager Party Items Product Manager Operations Vice President Finance Chief FInancial Officer Legal General Counsel Personnel Vice President Hokie Corporation Corporate Headquarters President and CEO
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Cost Centers Clothing Product Manager Bottling Plant Manager Warehouse Manager Distribution Manager Sauces Product Manager Party Items Product Manager Operations Vice President Finance Chief FInancial Officer Legal General Counsel Personnel Vice President Hokie Corporation Corporate Headquarters President and CEO Responsibility Centers
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Segment Reporting A
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This note was uploaded on 06/21/2010 for the course ACIS 2116 taught by Professor Cmeasterwood during the Fall '08 term at Virginia Tech.

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ACIS 2116 Chapter 12 PowerPoints Spring 2009 -...

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