C1112s - 1 ACCT 220 Segment Reporting, Decentralization,...

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Unformatted text preview: 1 ACCT 220 Segment Reporting, Decentralization, and the Balanced Scorecard (Chapter 12) The goals: Discuss the concepts of decentralization, segment profitability, and the balanced scorecard; in particular: Prepare a segmented income statement, determine segment profitability using return on investment and residual income, and explain the advantages and shortcoming of both methods. Explain how to construct and use a balanced scorecard. Explain the concept of transfer pricing; determine the range within which a transfer price should fall. 2 3 Decentralization in organizations The authority is delegated to the subordinates when they make actual decisions The formal authority may remain with the higher-ups Delegation has its advantages and shortcomings The advantages: The information generated at different levels of the hierarchy is used more effectively Lower-level managers often have stronger incentives to work hard The shortcomings: In general, delegation leads to the loss of control by the higher- level managers It may hinder communication Responsibility Centers Responsibility accounting systems link lower-level managers’ decision-making authority with accountability for the outcomes of those decisions. The term responsibility center is used for any part of an organization whose manager has control over, and is accountable for cost, profit, or investments. The three primary types of responsibility centers are: cost centers, profit centers, and investment centers. 4 Responsibility Centers Salty Snacks Product Manger Bottling Plant Manager Warehouse Manager Distribution Manager Beverages Product Manager Confections Product Manager Operations Vice President Finance Chief FInancial Officer Legal General Counsel Personnel Vice President Superior Foods Corporation Corporate Headquarters President and CEO Cost Centers Investment Centers Superior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization. Responsibility Centers Salty Snacks Product Manger Bottling Plant Manager Warehouse Manager Distribution Manager Beverages Product Manager Confections Product Manager Operations Vice President Finance Chief FInancial Officer Legal General Counsel Personnel Vice President Superior Foods Corporation Corporate Headquarters President and CEO Superior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization. Profit Centers Responsibility Centers Salty Snacks Product Manger Bottling Plant Manager Warehouse Manager Distribution Manager Beverages Product Manager Confections Product Manager Operations Vice President Finance Chief FInancial Officer Legal General Counsel Personnel Vice President Superior Foods Corporation Corporate Headquarters President and CEO Cost Centers Superior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization. Decentralization and Segment Reporting...
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This note was uploaded on 01/10/2012 for the course ACCT 220 taught by Professor Kirillnovoselov during the Fall '08 term at HKUST.

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C1112s - 1 ACCT 220 Segment Reporting, Decentralization,...

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