Notes_Chapter_12 - CHAPTER 12: SEGMENT REPORTING AND...

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CHAPTER 12: SEGMENT REPORTING AND DECENTRALIZATION I. Decentralization in Organizations A. In a decentralized organization , decision-making is B. Advantages of decentralization C. Disadvantages of decentralization II. Organizational Control A. A control system is established to achieve conformity between goals and actions (ex. training programs, budgets, standards, authorizations, procedures, etc.) Budgetary Control is the use of budgets in controlling operations; compare actual results to planned objectives. 1
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B. Responsibility Accounting Responsibility accounting involves accumulating and reporting costs (and revenues) on the basis of the manager who has the authority to make the day-to-day decisions about the items. Break organization into responsibility centers (a subunit responsible for its activities); prepare a report for each segment to be used to evaluate managers’ performance C. Three types of responsibility centers 1. Cost Centers 2. Profit Centers 3. Investment Centers 2
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III. SEGMENTED INCOME STATEMENTS Managers need more than a single, company-wide income statement; they need statements that focus on the various segments of a company. A. DEFINITION OF A SEGMENT: A segment is any part or activity of an organization about which a manager seeks cost or revenue data. Examples: sales territories, products, divisions of a company, individual salespersons, individual customers, etc. *** To Facilitate performance evaluation, segmented income statements can be prepared at various levels *** Sales and variable costs are generally traceable to a given segment but fixed costs may or may not be B. TRACEABLE AND COMMON FIXED COSTS A cost is either traceable or common with respect to a particular segment. Traceable costs Common costs 3
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EXAMPLE: SEGMENT REPORTING Mary Fischer, the owner of Mary’s Market, would like information concerning the performance of the Market’s two main segments—the Meat Department and the Produce Department. Identify if the following costs would most likely be: (1) a variable cost for a given department, (2) a traceable
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This note was uploaded on 06/01/2011 for the course ACCOUNTING 230 taught by Professor Allen during the Spring '11 term at Texas A&M.

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Notes_Chapter_12 - CHAPTER 12: SEGMENT REPORTING AND...

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