ACCT620Chapter10

ACCT620Chapter10 - CHAPTER 10 PROFIT AND COST CENTER...

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Unformatted text preview: 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 10.10 Responsibility reporting systems identify variances from budget plans and relate those exceptions to the manager responsible for them. Solutions 10-2 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.production for the materials efficiency variance....
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This note was uploaded on 01/11/2012 for the course ACCT 202 taught by Professor Terru during the Spring '11 term at NYU.

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ACCT620Chapter10 - CHAPTER 10 PROFIT AND COST CENTER...

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