Chapter 9_blackboard

Chapter 9_blackboard - CHAPTER 9 9-1 Chapter Overview...

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CHAPTER 9 9-1
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Chapter Overview Responsibility Accounting • Decentralization • Responsibility Centers Performance Measurement • Return on Investment • Residual Income • Balanced Scorecard Responsibility Reports • Guidelines • Management by Exception • Controllability
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An accounting system that provides information . . . Responsibility Accounting Relating to the responsibilities of individual managers. To evaluate managers on controllable items. Accounting as the Language of Business
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Decision Making is Pushed Down Supervisor Supervisor Middle Management Supervisor Supervisor Middle Management Top Management Decentralization often occurs as organizations continue to grow. Responsibility Accounting Decentralization The delegation of freedom to make decisions is called decentralization Continuum
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Improves quality of decisions Encourages upper-level management to concentrate on strategic decisions Improves productivity Develops lower-level managers Improves performance evaluation Advantages Responsibility Accounting Decentralization
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Successful implementation of responsibility accounting depends on clear lines of authority and clearly defined levels of responsibility. Vice President of Finance Department Manager Store Manager Vice President of Operations Vice President of Marketing President Board of Directors Responsibility Accounting
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A responsibility center is a set of activities assigned to a manager, a group of managers, or other employees. Identifying Responsibility Centers Types of Responsibility Centers Investment Center Profit Center Cost Center Responsibility Accounting - Responsibility Centers
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Organization Chart Corporate headquarters – Panther Holding Company Lumber manufacturing division Home building division Furniture manufacturing division Wilson Carpet Company Selma Sopha Corporation Tables Incorporated Sales department Production department Planning department Accounting department Cutting department Assembly department Finishing department Responsibility Level 1 2 3 4 5 ? Center ? Center ? Center
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Cost Center Profit Center Investment Center Evaluation Measures Profitability Contribution IS Return on investment (ROI) Residual income (RI) Cost Standards (Control Quantity and Quality of services) Responsibility Center Performance Measurement
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Return on Investment Return on investment is the ratio of income to the investment used to generate the income. ROI = Operating Income Operating Assets Performance Measurement
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Return on Investment Panther Holding Company provides the following information for the company’s second level investment centers. Lumber Manufacturing Division Home Building Division Furniture Manufacturing Division Operating income 60,000 $ 46,080 $ 81,940 $ Operating assets 300,000 256,000 482,000 Let’s calculate ROI ROI = Performance Measurement ROI =
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= Operating Income Operating Assets Margin Turnover Factors Affecting ROI ROI = × Sales Operating Assets Operating Income Sales Performance Measurement
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This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

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Chapter 9_blackboard - CHAPTER 9 9-1 Chapter Overview...

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