Ch 11: Responsibility Accounting

Question 1

Decentralization

Answer 1

autonomy of individaul managers to make own decision

Question 2

pros of decentarironation

Answer 2

more info available

help to train managers to move up ranks

higher status

profit companies use this usually

Question 3

cons of decentralization

Answer 3

goal incongruence

duplicated activities

more reports to prepare (and explain) to top mgmt =$$

difficult to eval what non profit company managers are doing

Question 4

responsibility accounting

Answer 4

Accumulating and reporting costs (and revenues where relevant) that involve the manager who has the authority to make the decisions about the items. Their performance is based on matters that are directly within their control.

Question 5

5 centers of responsibility accounting

Answer 5

1. cost center: manager accountable only for costs (minimizing)
2. expense/discretionary cost center: attain service goal and spend budget
3. revenue center: maximize total revenues (constrained by expsense budget)
4. profit center: responsibe for controlling cots, expenses, revenues
5. investment center: responsible for profis and investment dexision

Question 6

Segmented Income Statement

Answer 6

Segment: Subunit of a company.
This I/S uses the Contribution Margin Approach (variable costing)

Question 7

segemented income statement notes!@

Answer 7

Include Traceable Costs: Fixed costs that exist when the segment exists and do not when the segment is gone.
Remove Common Costs (Unallocated): Costs that would remain regardless of the segment’s existence.
Differentiate between controllable and uncontrollable costs by segment manager where possible.