ACC445 P3T1 DB 1-30-07 - Phase 3 Performance(DB by...

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Reply to Message | Reply to Forum | Print | Save | Email Using the income statement and balance sheet for SSOG, calculate the performance of each center, comparing  2005 actual results with the budgeted results.  Using the four responsibility centers of cost, revenue, profit, and investment:  What cost measurements are used for each of these centers? Which centers performed better than budget, and which performed worse than budget? What are the main causes for the performance of each center? In your own words, please post a response to the Discussion Board and comment on other postings. You  will be graded on the quality of your postings. © Copyright 2006 Colorado Technical University Online. All Rights Reserved. by gina.waters on 1/27/2007 10:12:02 AM Reply to Message | Reply to Forum | Print | Save | Email Gina Waters ACC445-0701A-01 Phase 2 Task 1 January 27, 2007 The use of responsibility centers is one of the most established and widely used techniques in financial control. Responsibility accounting breaks a large organization into smaller, more easily manageable units known as responsibility centers. Each unit is looked upon as a small business. Managers bear an element of responsibility for the performance of their respective centers. The principle of controllability applies to responsibility accounting. The presumption underlying controllability is that every dollar earned or dollar spent is under the control of, and can be traced to, at least one manager. Responsibility accounting represents decentralization of a business enterprise. It is comparable to a political policy of shifting power from the federal government to state or even municipal government. Cost centers: those in which the manager and the center employees have control over costs, but not revenues or the level of investment. Revenue center: The center manager has control over revenues, but not costs or the level of investment, in a revenue center. Profit center: The manager is responsible for both the revenues and costs. Thus he is responsible for the difference between the revenue and costs. Investment center: One in which the manager controls costs, revenue, and the level of investment. Level of investment represents expenditure on space, equipment, and other capital resources. The metrics used to evaluate performance vary for each type of responsibility center. For a cost center, price variance is assessed. Price variance is the difference between the average price paid for a certain supply and the budgeted amount. The assumption is that the purchasing manager, through management of factors such as inventory and purchasing discounts, exerts some control over average price paid. In a revenue center, sales price and sales volume are examined. In profit center profits are examined. Investment centers
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ACC445 P3T1 DB 1-30-07 - Phase 3 Performance(DB by...

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