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FinMan10e_ch23 - 1 Describe the advantages and...

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11-1 23-1 1 Describe the advantages and disadvantages of decentralized operations. 23-4
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11-2 23-2 In a decentralized company, managers of separate divisions or units are delegated operating responsibility. The division (unit) managers are responsible for planning and controlling the operations of their divisions. Decentralized Operations 1
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11-3 23-3 1. Allows managers closest to the operations to make decisions 2. Provides excellent training for managers 3. Allows managers to become experts in their area of operation 4. Helps retain managers 5. Improves creativity and customer relations Advantages of Decentralization 1 Exhibit 1 Advantages and Disadvantages of Decentralized Operations (continued)
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11-4 23-4 1. Decisions made by managers may negatively affect the profits of the company 2. Duplicates assets and expenses 1 Disadvantages of Decentralization Exhibit 1 Advantages and Disadvantages of Decentralized Operations (continued)
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11-5 23-5 Responsibility Accounting In a decentralized business, accounting assists managers in evaluating and controlling their areas of responsibility, called responsibility centers . 1
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11-6 23-6 Responsibility accounting is the process of measuring and reporting operating data by responsibility centers. Three common types of responsibility centers are— Cost centers Profit centers Investment centers 1
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11-7 23-7 The area of responsibility for each center is shown below. Cost Center Profit Center Investment Center Cost Revenue – Cost Profit Revenue – Cost Profit Investment in assets 1
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11-8 23-8 2 Prepare a responsibility accounting report for a cost center. 23-11
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11-9 23-9 Responsibility Accounting for Cost Centers A cost center manager has responsibility for controlling the costs. 2
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11-10 23-10 Cost Centers in a University Exhibit 2 2
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11-11 23-11 Responsibility Accounting Reports for Cost Centers (continued) Exhibit 3 2
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11-12 23-12 from Manager, Plant A Budget Performance Report (continued) Responsibility Accounting Reports for Cost Centers (continued) Exhibit 3 2
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11-13 23-13 To Vice President’s Budget Performance Report from Supervisor, Department 1, Plant A’s Budget Performance Report (continued) Responsibility Accounting Reports for Cost Centers (continued) Exhibit 3 2
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11-14 23-14 To Manager, Plant A’s Budget Performance Report Responsibility Accounting Reports for Cost Centers (concluded) Exhibit 3 2
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11-15 23-15 2 Example Exercise 23-1 Budgetary Performance for Cost Center 23-18 For Practice: PE 23-1A, PE 23-1B Nuclear Power Company’s costs were over budget by $24,000. The company is divided into the North and South regions. The North Region’s costs were under budget by $2,000. Determine the amount that the South Region’s cost was over or under budget. Follow My Example 23-1 $26,000 over budget ($24,000 + $2,000)
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11-16 23-16 3 Prepare responsibility accounting reports for a profit center.
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