Chapter 9_blackboard - CHAPTER 9 9-1 Chapter Overview Responsibility Accounting Decentralization Responsibility Centers Performance Measurement

CHAPTER 99-1

Chapter OverviewResponsibility Accounting•Decentralization•Responsibility CentersPerformance Measurement•Return on Investment•Residual Income•Balanced ScorecardResponsibility Reports•Guidelines•Management by Exception•Controllability

An accounting system thatprovidesinformation. . .Responsibility AccountingRelating to theresponsibilities ofindividualmanagers.To evaluatemanagers oncontrollable items.Accounting as the Languageof Business

Decision Making is Pushed DownSupervisorSupervisorMiddleManagementSupervisorSupervisorMiddleManagementTopManagementDecentralization often occurs asorganizations continue to grow.Responsibility AccountingDecentralizationThe delegation of freedom to make decisionsis calleddecentralizationContinuum

Improves qualityof decisionsEncourages upper-level management toconcentrate on strategic decisionsImprovesproductivityDevelopslower-levelmanagersImprovesperformanceevaluationAdvantagesResponsibility AccountingDecentralization

Successful implementation ofresponsibilityaccountingdepends on clear lines of authorityand clearly defined levels of responsibility.Vice Presidentof FinanceDepartment ManagerStore ManagerVice Presidentof OperationsVice Presidentof MarketingPresidentBoard of DirectorsResponsibility Accounting

Aresponsibilitycenteris a set of activitiesassigned to a manager, a group ofmanagers, or other employees.Identifying Responsibility CentersTypes of Responsibility CentersInvestmentCenterProfitCenterCost CenterResponsibility Accounting -Responsibility Centers

Organization ChartCorporate headquarters–Panther Holding CompanyLumbermanufacturingdivisionHomebuildingdivisionFurnituremanufacturingdivisionWilson CarpetCompanySelma SophaCorporationTablesIncorporatedSalesdepartmentProductiondepartmentPlanningdepartmentAccountingdepartmentCuttingdepartmentAssemblydepartmentFinishingdepartmentResponsibilityLevel12345?Center?Center?Center

CostCenterProfitCenterInvestmentCenterEvaluation MeasuresProfitabilityContribution ISReturn on investment (ROI)Residual income (RI)Cost Standards(Control Quantity andQuality of services)Responsibility CenterPerformance Measurement

Return on InvestmentReturn on investment is the ratio ofincome to the investment used togenerate the income.ROI=Operating IncomeOperating AssetsPerformance Measurement

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Term

Fall

Professor

NICHOLASW.SCHROEDER