Anthony Burkhardt's Ch24PowerPoint

Profit centers responsibility accounting for profit

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Unformatted text preview: investment decisions such as plant expansion Chapter 24-7 Responsibility Accounting for Cost Centers Responsibility Accounting for Cost Centers Example – Fox Manufacturing Company Assumes department manager can control all manufacturing overhead costs except depreciation, property taxes, and his own monthly salary of $4,000 Chapter 24-8 Responsibility Accounting for Profit Centers Responsibility Accounting for Profit Centers Direct and Indirect Fixed Costs – both may be present Direct both may be present Responsibility Report Shows budgeted & actual controllable revenues & costs budgeted actual revenues & costs Prepared using the cost­volume­profit income statement format: Deduct controllable fixed costs from the contribution margin Contribution margin - excess of contribution margin over Contribution margin controllable fixed costs, it is the best measure of a manager’s performance in controlling revenues and costs Do not report non­controllable fixed costs not report non­controllable fixed costs Chapter 24-9 Modifying the Format of the CVP Income Statement Modifying the Format of the CVP Income Statement Ch22 CVP Income State. VS. Ch24 CVP Income State. Sales - Variable Costs = Contribution Margin - Fixed Costs = Net Income Sales - Variable Costs = Contribution Margin - Controllable Fixed Costs = Controllable Margin - Non-Controllable Fixed Costs = Net Income C h a p te r 2 2 ’s C VP inc o m e s ta te m e nt wa s m o d ifie d b y ta king th e to ta l fixe d c o s ts a nd s p litting it into “c o ntro lla b le fixe d c o s ts ” a nd “no n­c o ntro lla b le fixe d c o s ts .” A ne w te rm is c re a te d , “C o ntro lla b le Ma rg in” wh ic h is e q ua l to c o ntrib utio n m a rg in m inus c o ntro lla b le fixe d c o s ts . Chapter 24-10 Responsibility Accounting for Profit Centers Responsibility Accounting for Profit Centers Example – Mantle Manufacturing Company $60,000 indirect fixed costs not controllable by manager Chapter 24-11 Responsibility Accounting for Investment Centers Responsibility Accounting for Investment Centers Computation of ROI (example data assumed): (example Computation O p e ra ting a s s e ts inc lud e current assets and plant current assets used in operations b y th e c e nte r a nd c o ntro lle d b y m a na g e r. Exc lud e non-operating assets s uc h a s id le p la nt a s s e ts a nd la nd h e ld fo r future us e Chapter 24-12 Ba s e th e average o p e ra ting a s s e ts o n th e b e g inning a nd e nd ing c o s t o r b o o k va lue s o f th e a s s e ts Responsibility Accounting for Investment Centers Responsibility Accounting for Investment Centers Example – Mantle Manufacturing Company Chapter 24-13...
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This document was uploaded on 03/23/2014.

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