FinMan10e_ch23 - 11-123-11Describe the advantages and...

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Unformatted text preview: 11-123-11Describe the advantages and disadvantages of decentralized operations.23-411-223-2In a decentralizedcompany, 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 Operations111-323-31.Allows managers closest to the operations to make decisions2.Provides excellent training for managers3.Allows managers to become experts in their area of operation4.Helps retain managers5.Improves creativity and customer relationsAdvantages of Decentralization1Exhibit 1Advantages and Disadvantages of Decentralized Operations(continued)11-423-41.Decisions made by managers may negatively affect the profits of the company2.Duplicates assets and expenses1Disadvantages of DecentralizationExhibit 1Advantages and Disadvantages of Decentralized Operations(continued)11-523-5Responsibility AccountingIn a decentralized business, accounting assists managers in evaluating and controlling their areas of responsibility, called responsibility centers.111-623-6Responsibility accounting is the process of measuring and reporting operating data by responsibility centers. Three common types of responsibility centers areCost centersProfit centersInvestment centers111-723-7The area of responsibility for each center is shown below.Cost Center Profit Center Investment CenterCostRevenue CostProfitRevenue CostProfitInvestment inassets111-823-82Prepare a responsibility accounting report for a cost center.23-1111-923-9Responsibility Accounting for Cost CentersA cost center manager has responsibility for controlling the costs.211-1023-10Cost Centers in a UniversityExhibit 2211-1123-11Responsibility Accounting Reports for Cost Centers(continued)Exhibit 3211-1223-12from Manager, Plant A Budget Performance Report (continued)Responsibility Accounting Reports for Cost Centers(continued)Exhibit 3211-1323-13To Vice Presidents Budget Performance Reportfrom Supervisor, Department 1, Plant As Budget Performance Report(continued)Responsibility Accounting Reports for Cost Centers(continued)Exhibit 3211-1423-14To Manager, Plant As Budget Performance ReportResponsibility Accounting Reports for Cost Centers(concluded)Exhibit 3211-1523-152Example Exercise 23-1Budgetary Performance for Cost Center23-18For Practice: PE 23-1A, PE 23-1BNuclear Power Companys costs were over budget by $24,000. The company is divided into the North and South regions. The North Regions costs were under budget by $2,000. Determine the amount that the South Regions cost was over or under budget. Follow My Example 23-1$26,000 over budget ($24,000 + $2,000)11-1623-163Prepare responsibility accounting reports for a profit center....
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FinMan10e_ch23 - 11-123-11Describe the advantages and...

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