C1112s - ACCT220 SegmentReporting,Decentralization...

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1 ACCT 220 Segment Reporting, Decentralization,  and the Balanced Scorecard (Chapter 12)
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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
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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
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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
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Responsibility Centers S a l t y S n a c k s P r o d u c t M a n g e r B o t t l i n g P l a n t M a n a g e r W a r e h o u s e M a n a g e r D i s t r i b u t i o n M a n a g e r B e v e r a g e s P r o d u c t M a n a g e r C o n f e c t i o n s P r o d u c t M a n a g e r O p e r a t i o n s V i c e P r e s i d e n t F i n a n c e C h i e f F I n a n c i a l O f f i c e r L e g a l G e n e r a l C o u n s e l P e r s o n n e l V i c e P r e s i d e n t S u p e r i o r F o o d s C o r p o r a t i o n C o r p o r a t e H e a d q u a r t e r s P r e s i d e n t a n d C E O Cost Centers Investment Centers Superior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization.
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Responsibility Centers S a l t y S n a c k s P r o d u c t M a n g e r B o t t l i n g P l a n t M a n a g e r W a r e h o u s e M a n a g e r D i s t r i b u t i o n M a n a g e r B e v e r a g e s P r o d u c t M a n a g e r C o n f e c t i o n s P r o d u c t M a n a g e r O p e r a t i o n s V i c e P r e s i d e n t F i n a n c e C h i e f F I n a n c i a l O f f i c e r L e g a l G e n e r a l C o u n s e l P e r s o n n e l V i c e P r e s i d e n t S u p e r i o r F o o d s C o r p o r a t i o n C o r p o r a t e H e a d q u a r t e r s P r e s i d e n t a n d C E O Superior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization.
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