Responsibility Accounting, Transfer Pricing, BSC

Question 1

End Product of Responsibility Accounting

Is there a standard need to be followed?

Answer 1

End product is Performance Report
No standards like GAAP

Question 2

Types of Center

What is the primary consideration in determining what type of center?

Answer 2

1. Cost Center
2. Revenue Center
3. Profit Center (combination of two)
4. Investment Center (highest level)
   - Business within a business
   - Exist as if another company
   - Autonomy

Primary consideration → responsibility
Secondary → nature of operation

Question 3

Available to What Type of Center?

Variance Analysis

Answer 3

Cost, Revenue, Profit, Investment Center

Question 4

Available to What Type of Center?

Segmented Income Statement

Answer 4

Profit and Investment Center

Question 5

Available to What Type of Center?

ROI, RI, EVA

Answer 5

Investment Center

Question 6

Basis of Performance

If manager is to be hired or fired
If segment is to be contrinued or dropped

Answer 6

Manager - controllable (performance margin)
Segment - segment margin

Question 7

Formula for Controllable Margin

Answer 7

Contribution Margin (from CVP)
Less : Traceable Fixed Cost (Controllable)

Question 8

Formula for Segment Margin

Answer 8

Contribution Margin (from CVP)
Less : Traceable Fixed Cost (Controllable)
Less : Traceable Fixed Cost (Non Controllable)

Question 9

ROI

MarTur ROI

Answer 9

Income in ROI is EBIT
Income in ROA is NI

Question 10

Formula for Residual Income

Answer 10

Income less Required Income

Required Income = Assets x Minimum ROI

Question 11

Formula for Economic Value Added

Answer 11

EAT less Required Income

Required Income = (Total Assets - CL) x WACC

Question 12

The upper limit in transfer pricing is the selling price of the product. True or False?

Answer 12

False (should be Supplier’s Price)

Question 13

In case of excess capacity, the lower limit in transfer pricing is the Variable Cost. True or False?

Answer 13

True

Question 14

Limit of Transfer Price

Upper
Lower (Full Capacity and Excess Capacity)

Answer 14

Upper
- Supplier’s Price

Lower (Unit VC + Lost Unit CM)
- Full capacity = SP
- Excess capacity = VC

Lost unit CM is an opportunity cost

Question 15

Perspective in BSC

Financial (1) and Non Financial (3)
Which is a lagging indicator?
A leading indicator?

Answer 15

• Financial
• Customer
• Internal Business Process
• Learning and Growth

Financial is a lagging indicator
Others are leading indicator

Question 16

Delivery Cycle (Lead) Time

Answer 16

Wait Time + Manufacturing Cycle Time

Manifacturing Cycle Time = process + inspection + move + queue

Question 17

Formula for Manufacturing Cycle Efficiency

Answer 17

Value-Added Time (process time)
———————
Manufacturing Cycle Time

MCE = also called throughput time