Managerial Accounting: Ch 22 Flashcards
decentralized organization
large companies that are divided into smaller units - divisions, segments, departments, etc.
responsibility accounting
evaluates unit managers only on activities they can control. divides a company into three types of responsibility centers then measures their performance
cost center
manager is accountable for costs only - not involved in selling the product and performance is evaluated by comparing actual costs to budgeted costs
profit center
manager is accountable for revenues and costs - performance is evaluated by comparing actual revenue, costs, and profit to budgeted revenue, costs, and profit
investment center
manager is accountable for revenues, costs, and efficiently managing assets - performance is evaluated on their use of assets to generate income
controllable costs
costs that managers can determine or influence and that are used to measure performance
responsibility accounting performance report for cost centers
analysis of differences between budgeted and actual amounts often results in corrective or strategic managerial actions
computing departmental income allocating expenses decisions
- how to allocate indirect expenses
- how to allocate service department expenses
direct expenses
costs readily traced to a department because they are incurred for that departments sole benefit
indirect expenses
costs incurred for the joint benefit of more than one department (allocated to all departments that benefited)
service department expenses
costs that benefit more than one department and cannot be readily traced to one department (allocated to operating departments)
allocated cost =
total costs to allocate x percentage of allocation base used
departmental income =
departmental sales - departmental direct expenses - allocated indirect expenses - allocated service department expenses
departmental contribution to overhead
sales minus the cost of goods sold and direct expenses - it is a performance measure based on controllable costs
balanced scorecard
a system of performance measures including non financial measures used to assess company and devision manager performance
lead balanced scorecard perspectives
- customer perspective: customer satisfaction
- internal processes perspective: internal operations
- innovation/learning perspective: people and information systems
lag balanced scorecard perspective
- financial perspective: profitability and components
transfer price
used to record transfers of goods across divisions of the same company
cost based transfer price
minimum transfer price the selling division will be willing to accept is their variable cost of producing the product.
