PWRPT C10 ROI - Chapter 10: Performance Evaluation,...

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Unformatted text preview: Chapter 10: Performance Evaluation, Variable Costing, and Decentralization Ties to Chapter 9 (Flexible Budgeting) and to Management courses in terms of performance evaluation and control. The chapter introduces two financial metrics, ROI and RI (aka E.V.A.), that are used extensively. Decision Making is Pushed Down Sup ervisor Sup ervisor Mi ddl e Ma nage me nt Sup ervisor Sup ervisor Mi ddl e Ma nage me nt Top Ma nage me nt Decentralization often occurs as organizations continue to grow. Background Motivation: Decentralization Decentralization Improves quality of decisions. Encourages upper-level management to concentrate on strategic decisions. Improves productivity. Develops lower-level managers. Improves performance evaluation. Advantages Example: Business Segments A segment is any part of an organization about which a manager seeks cost, revenue, or profit data. A segment can be . . . Quick Mart An Individual Store A Sales Territory A Service Center General Electric GE Insurance GE Infrastructure NBC GE Equipment Services GE Transportation GE Healthcare GE Advanced Materials How do you evaluate and compare such diverse businesses? Responsibility Accounting: Theoretically, you want to Hold managers responsible ONLY for things under their control. This doesnt always happen. Im in control Controllability Concept Managers should only be evaluated on revenues or costs they control. Since the exercise of control may be clouded, managers are usually held responsible for items over which they have predominant rather than absolute control. Successful implementation of responsibility accounting depends on clear lines of authority and clearly defined levels of responsibility....
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PWRPT C10 ROI - Chapter 10: Performance Evaluation,...

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