It concludes by emphasizing the contingency notion of

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Unformatted text preview: ounting structure and the organization’s formal authority structure. The chapter also briefly describes the characteristics of the four phases of the management control process: programming, budgeting, measuring, and reporting. Chapter 7. Key Issues in Designing the Responsibility Accounting Structure This chapter expands upon the concepts covered in Chapter 6, and discusses the topics of transfer prices, residual income, fairness, and goal congruence. Inadequate senior management attention to these four topics—either individually or in combination—explains why many responsibility accounting systems fail to achieve the goal of allowing managers to exert control over the resources for which they are being held responsible. The chapter also examines three important issues: (a) the link between the responsibility center structure and the organization’s motivation system, (b) some of the informal matters that arise in the context of decentralizing re- Copyrighted Material. Do not reproduce without written permission. sponsibility in large, complex organizations, and (c) the issues that senior managers must consider in order to make either profit or investment centers work to the overall benefit of the organization, including some tricky des...
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