Responsibility Accounting, Transfer Pricing, BSC Flashcards
End Product of Responsibility Accounting
Is there a standard need to be followed?
End product is Performance Report
No standards like GAAP
Types of Center
What is the primary consideration in determining what type of center?
- Cost Center
- Revenue Center
- Profit Center (combination of two)
- Investment Center (highest level)
- Business within a business
- Exist as if another company
- Autonomy
Primary consideration → responsibility
Secondary → nature of operation
Available to What Type of Center?
Variance Analysis
Cost, Revenue, Profit, Investment Center
Available to What Type of Center?
Segmented Income Statement
Profit and Investment Center
Available to What Type of Center?
ROI, RI, EVA
Investment Center
Basis of Performance
If manager is to be hired or fired
If segment is to be contrinued or dropped
Manager - controllable (performance margin)
Segment - segment margin
Formula for Controllable Margin
Contribution Margin (from CVP)
Less : Traceable Fixed Cost (Controllable)
Formula for Segment Margin
Contribution Margin (from CVP)
Less : Traceable Fixed Cost (Controllable)
Less : Traceable Fixed Cost (Non Controllable)
ROI
MarTur ROI
Income in ROI is EBIT
Income in ROA is NI
Kaya EBIT kasi since branch (investment center) lang siya, hindi naman siya maapektuhan ng IT (interests and taxes)
Formula for Residual Income
Income less Required Income
Required Income = Assets x Minimum ROI
Formula for Economic Value Added
EAT less Required Income
Required Income = (Total Assets - CL) x WACC
EAT = EBIT after Tax
The upper limit in transfer pricing is the selling price of the product. True or False?
False (should be Supplier’s Price)
In case of excess capacity, the lower limit in transfer pricing is the Variable Cost. True or False?
True
Limit of Transfer Price
Upper
Lower (Full Capacity and Excess Capacity)
Upper
- Supplier’s Price
Lower (Unit VC + Lost Unit CM)
- Full capacity = SP
- Excess capacity = VC
Lost unit CM is an opportunity cost
Perspective in BSC
Financial (1) and Non Financial (3)
Which is a lagging indicator?
A leading indicator?
- Financial
- Customer
- Internal Business Process
- Learning and Growth
Financial is a lagging indicator
Others are leading indicator
Lead Time and Throughput Time, a measure of efficiency, is part of learning and growth perspective. True or False?
False
- kahit pa mukha siyang for “improvement” → learning and growth, it is part of Internal Business Process
Delivery Cycle (Lead) Time
Wait Time + Manufacturing Cycle Time
Manifacturing Cycle Time = process + inspection + move + queue
Formula for Manufacturing Cycle Efficiency
Value-Added Time (process time)
———————
Manufacturing Cycle Time
MCE = also called throughput time
