AMA Q22 - Chapter 14 Flashcards

1
Q

Responsibility Accounting

A

Used to measure the performance of decentralised divisions of a business

Places responsibility of costs and revenues that are controllable to the rightful manager

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2
Q

What two metrics monitor the performance of investment centre managers?

A

Return On Investment

and

Residual Income

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3
Q

ROI formula

A

(Profit PBIT / Capital Employed) x 100

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4
Q

RI formula

A

PBIT - (investment x cost of capital)

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5
Q

Cost of Capital

A
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6
Q

Transfer Pricing

A

the price that goods transferred from one division of a company to another are charged at

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7
Q

Main consideration when it comes to transfer pricing?

A

Does it act in the best interests of the entire company?

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8
Q
A
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