Chapter 14 - Chapter 14:Performance Evaluation for...

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Chapter 14:Performance Evaluation for Decentralized Operations
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Centralized and Decentralized Operations Centralized business – all major planning and operating decisions are made by top management. Decentralized business – separating a business into divisions and delegating responsibility to unit managers. Divisions are structured around common functions, products, customers, or regions.
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Advantages of Decentralization Delegating authority to unit managers… Can result in better decisions because these managers anticipate and react to operating data more quickly. Allows managers to focus their area of expertise. Provides excellent manager training.
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Disadvantages of Decentralization Decisions made by one manager may negatively affect the profitability of the entire organization. Possible duplication of assets and costs in operating divisions.
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Responsibility Accounting in Decentralized Operations Responsibility accounting is the process of measuring/reporting operating data by responsibility center. A responsibility center is the area for which a unit manager is responsible.
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Three Common Types of Responsibility Centers The three types of responsibility centers differ in the unit manager’s scope of responsibility.
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Responsibility Accounting for Cost Centers Unit manager only has responsibility and authority for controlling costs.
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This note was uploaded on 02/24/2011 for the course ACCT 7080 taught by Professor Housain during the Spring '11 term at U. Memphis.

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Chapter 14 - Chapter 14:Performance Evaluation for...

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