ACCT620Chapter10

ACCT620Chapter10 - CHAPTER10...

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CHAPTER 10 PROFIT AND COST CENTER PERFORMANCE EVALUATION Questions, Exercises, Problems, and Cases:  Answers and Solutions 10.1 See text or glossary at the end of the book. 10.2 b. A responsibility center’s variances are calculated holding all other things  constant. 10.3 a. Marketing. 10.4 It is difficult to evaluate performance without a budget.  Organizations  might   use   nonfinancial   performance   measures   as   discussed   in   the  chapter   such   as   on-time   deliveries,   production-cycle   efficiency,   and  percent of errors in products. 1. Some   responsibility   centers   are   responsible   only   for   costs.     The  assembly unit of a manufacturing plant would be a good example.  On the other hand, some responsibility centers, such as sales offices,  are responsible for revenues.   Other responsibility centers such as  corporate   divisions   are   responsible   for   both   revenues   and   costs.  Finally,   some   responsibility   centers   are   responsible   for   revenues,  costs,   and   investment   in   company   assets.     The   designation   of  responsibility   centers   depends   on   the   specific   organizational  structure and management system in the organization. 2. The   percentage   of   positions   filled   from   within   the   company   may  indicate   whether  or  not   employees   are   committed   enough  to   the  company   to   want   to   advance   and   employee   perception   of  advancement   possibilities.     It   may   also   indicate   employee  commitment by the quality of employee performance.  For instance, if  positions are not filled internally it may be because the employees  are not performing well enough to be promoted. 3. A standard is related to a cost per unit.  Budgets focus on totals. 10.8 a. Marketing. 10.9 Management must weigh the trade-offs between the costs of an investigation  and the costs of letting the process remain out of control for at least one more  reporting period (i.e., the benefit of correction). 10-1 Solutions
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10.10 Responsibility reporting systems identify variances from budget plans and relate  those exceptions to the manager responsible for them. Solutions 10-2
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10.11 The action that management can take in response to materials price variances is  probably   quite   different   than   the   action   that   can   be   taken   in   response   to  efficiency   variances.     The   latter   is   generally   more   subject   to   management  control.  Also, different departments may be responsible for each variance.  For  example, purchasing may be responsible for the materials price variance, and  production for the materials efficiency variance.
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