Managerial Accounting Chapter 12 – Flashcards
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define goal congruence
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results when the managers of subunits throughout an organization strive to achieve the goals set by top management
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how can an organization's managerial accounting system promote goal congruence?
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refers to the various concepts and tools used by managerial accountants to measure the performance of people and departments in order to foster goal congruence
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define responsibility center
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it is a subunit in an organization whose manager is held accountable for specified financial results of the subunit's activities.
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what are the four common types of responsibility centers?
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cost, revenue, profit and investment center
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define cost center
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an organizational subunit, such as a department or division, whose manager is held accountable for the costs incurred in the subunit
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what is an example of a cost center?
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the painting department in an automobile plant
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define revenue center
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the manager of a revenue center is held accountable for the revenue attributed to the subunit
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what is an example of a revenue center?
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the reservations department of an airline and the sales department of a manufacturer are revenue centers
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define profit center
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an organizational subunit whose manager is held accountable for profit. since profit is equal to revenue minus expenses, profit-center managers are held accountable for both the revenue and expenses attributed to their subunits.
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what is an example of a profit center?
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a company owned restaurant in a fast food chain
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define investment center
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the manager of an investment center is held accountable for the subunit's profit and the invested capital used by the subunit to generate its profit
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what is an example of an investment center?
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a division of a large corporation is typically designated as an investment center
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list the parts of a segmented income statement
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sales revenue-variable operating expenses = segment contribution margin - FC controllable by segment manager = profit margin controllable by segment manager - FC, traceable to segment, but controllable by others = segment profit margin - common fixed expenses = income before taxes - income tax expense = net income
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what are the three key features of segmented reporting?
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contribution format, controllable versus uncontrollable expenses, segmented income statement
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define contribution format in segmented reporting
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these income statements use the contribution format. the statements subtract VC from sales revenue to obtain the contribution margin
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define controllable versus uncontrollable expenses in segmented reporting
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the income statements highlight the costs that can be controlled, or heavily influenced, by each segment manager. this approach is consistent with responsibility accounting
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define segmented income statement
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segmented reporting shows income statements for the company as a whole and for its major segments
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what four types of costs for ensuring high quality are monitored?
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prevention, appraisal, internal failure and external failure costs
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define prevention costs
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the costs of preventing defects
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define appraisal costs
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the costs of determining whether defects exists
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define internal failure costs
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costs of repairing defects found prior to product delivery
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define external failure costs
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costs incurred after defective products have been delivered
