P1-C.2ResponsibilityCentersandReportingSegmentsP1-C.3PerformanceMeasures

1、C.2 Responsibility Centers and Reporting SegmentsC.3 Performance MeasuresResponsibility Centers and Reporting SegmentsPerformance MeasuresP186Responsibility Centers 責任中心責任中心Cost center成本中心成本中心Revenue center收入中心收入中心Profit center利潤中心利潤中心Investment center投資中心投資中心Responsibility Centers and Reporting Seg

2、mentsPerformance MeasuresP186Cost center成本中心成本中心 Production department Responsible for costs only Disadvantage：(1) Cost shifting (2) Short-termism (3) Allocation of service department costs Variance analysisResponsibility Centers and Reporting SegmentsPerformance MeasuresP187Revenue center收入中心收入中心 S

3、ales department Responsible for revenues only Variance analysisResponsibility Centers and Reporting SegmentsPerformance MeasuresP187Profit center利潤中心利潤中心 Application department Responsible for both revenues and costs Contribution margin Responsibility Centers and Reporting SegmentsPerformance Measur

4、esP188Responsibility Centers and Reporting SegmentsPerformance MeasuresP187Investment center投資中心投資中心 Branch office Responsible for revenues, expenses, and invested capital ROI, RI,EVAResponsibility Centers and Reporting SegmentsPerformance MeasuresP189Segment reporting 分部報告Product profitability anal

5、ysisArea office profitability analysisCustomer profitability analysisResponsibility Centers and Reporting SegmentsPerformance MeasuresP208A segment of an organization is referred to as a service center if it hasA.Responsibility for developing markets and selling the output of the organization.B.Resp

6、onsibility for combining the raw materials, direct labor, and other factors of production into a final output.C.Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply.D.Authority to provide specialized support to other u

7、nits within the organization.Responsibility Centers and Reporting SegmentsPerformance MeasuresP209Ordinarily, the most appropriate basis on which to evaluate the performance of a division manager is the divisionsA.ContributionB.Net revenue minus controllable division costsC.Gross profitD.Net revenue

8、 minus the divisions fixed costs.Responsibility Centers and Reporting SegmentsPerformance MeasuresP190(1) Return on investment (ROI) 投資回報率assets totalAverageprofitunit Business=ROIOperating income/ EBITResponsibility Centers and Reporting SegmentsPerformance MeasuresP190Responsibility Centers and Re

9、porting SegmentsPerformance MeasuresP200Major disadvantage of ROI:EXAMPLE: An investment center has an 8% ROI, and its investors expect 2%. Ifthe decision makers look only at current ROI，they will reject a project earning6%, even though that return exceeds the target.ROI of project = 6%ROI of invest

10、ment center = 8%Required rate of return = 2%Acceptance criteria： ROI of project ROI of investment center Responsibility Centers and Reporting SegmentsPerformance MeasuresP210A firm earning a profit can increase its return on investment byA.Increasing sales revenue and operating expenses by the same

11、dollar amount.B.Decreasing sales revenues and operating expenses by the same percentage.C.Increasing investment and operating expenses by the same dollar amount.D.Increasing sales revenues and operating expenses by the same percentage.Responsibility Centers and Reporting SegmentsPerformance Measures

12、P191(2) Residual income （RI） 剩余收益Residual Income = Business Unit Profit - (Average Total Assets Target Rate of Return)Business Unit Profit：EBITTarget Rate of Return：Minimum rate of return 最低報酬率 （大小取決于risk）Residual Income = Invested capital (ROI of project - Minimum rate of return )Acceptance criteri

13、a： ROI of project Minimum rate of return Responsibility Centers and Reporting SegmentsPerformance MeasuresP191Responsibility Centers and Reporting SegmentsPerformance MeasuresP211Residual income is a better measure for performance evaluation of an investment center manager than return on investment

14、becauseA.The problems associated with measuring the asset base are eliminated.B.Desirable investment decisions will not be neglected by high-return divisions.C.Only the gross book value of assets needs to be calculated.D.The arguments about the implicit cost of interest are eliminated.Responsibility

15、 Centers and Reporting SegmentsPerformance MeasuresP192Responsibility Centers and Reporting SegmentsPerformance MeasuresP192Responsibility Centers and Reporting SegmentsPerformance Measures(3) Economic Value Added (EVA) 經(jīng)濟增加值EVA=NOPAT - ( WACC Average invested capital )NOPAT: EBIT after taxWACC: wei

16、ghted average cost of capital Average invested capital : total asset- current liabilityResponsibility Centers and Reporting SegmentsPerformance MeasuresP192Common costs（共同成本）（共同成本） are the costs of products, activities, facilities, services, or operations shared by two or more cost objects. （1）Direc

17、t cause-and-effect relationship （2）Benefit received Responsibility Centers and Reporting SegmentsPerformance MeasuresP212Managers are most likely to accept allocations of common costs based onA.Cause and effectB.Ability to bear.C.FairnessD.Benefits receivedResponsibility Centers and Reporting Segmen

18、tsPerformance MeasuresP194Common cost allocation approaches:Stand-alone method 獨立成本分配法 Incremental method 增量成本分配法Responsibility Centers and Reporting SegmentsPerformance MeasuresP194EXAMPLE of common cost allocation：The proportionate costs of servicing three customers are presented in the table belo

19、w. The common cost of providing service to these customers is $8,000.Responsibility Centers and Reporting SegmentsPerformance MeasuresP195Department ADepartment BCompanyTransfer pricingSelling departmentBuying departmentGoodsResponsibility Centers and Reporting SegmentsPerformance MeasuresP195Transf

20、er pricing 轉(zhuǎn)移定價：pVariable cost 變動成本定價法p Full cost 全部成本定價法p Market price 市場法p Negotiation 協(xié)商定價法l Dual pricing 雙重定價法Responsibility Centers and Reporting SegmentsPerformance MeasuresP195 Excess capacity No incentive for selling division Buyer is motivated to solve the excess capacityResponsibility Cent

21、ers and Reporting SegmentsPerformance MeasuresP195 Full cost = material + labor + manufacturing OH Selling division will not incur a loss Buying division is motivated to buy internally No motivation for the selling division to control costsResponsibility Centers and Reporting SegmentsPerformance Mea

22、suresP196 Best transfer price Selling division is with full capacityResponsibility Centers and Reporting SegmentsPerformance MeasuresP196 Subunits are free to determine the prices Best bargainResponsibility Centers and Reporting SegmentsPerformance MeasuresResponsibility Centers and Reporting Segmen

23、tsPerformance MeasuresResponsibility Centers and Reporting SegmentsPerformance MeasuresP196Choice of transfer pricing policy:Goal congruence factorsSegmental performance factorsNegotiation factorsCapacity factorsCost structure factorsTax factorsResponsibility Centers and Reporting SegmentsPerformanc

24、e MeasuresP212Questions 5 through 7 are based on the following information:Parkside, Inc., has several divisions that operate as decentralized profit centers, Parksides Entertainment Division manufactures video arcade equipment using the products of two of Parksides other divisions. The Plastics Div

25、ision manufactures plastic components, one type that is made exclusively for the Entertainment Division, while other less complex components are sold to outside markets. The products of the Video Cards Division are sold in a competitive market; however, one video card model is also used by the Enter

26、tainment Division.The actual costs per unit used by the Entertainment Division are presented belowResponsibility Centers and Reporting SegmentsPerformance MeasuresP213The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component mad

27、e for the Entertainment Division would sell for $6.25 per unit on the open market. The market price of the video card used by the Entertainment Division is $10.98 per unit.Responsibility Centers and Reporting SegmentsPerformance MeasuresP2135. A per-unit transfer price from the Video Cards Division

28、to the Entertainment Division at full cost, $9.15, wouldA.Allow evaluation of both divisions on a competitive basis.B.Satisfy the Video Cards Divisions profit desire by allowing recovery of opportunity costs.C.Provide no profit incentive for the Video Cards Division to control or reduce costs.D.Enco

29、urage the Entertainment Division to purchase video cards from an outside sourceResponsibility Centers and Reporting SegmentsPerformance MeasuresP2136.Assume that the Entertainment Division is able to purchase a large quantity of video cards from an outside source at $8.70 per unit. The Video Cards Division, having excess capacity, agrees to lower its transfer price to $8.70 per unit. This action wouldA. Optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside, Inc.B. Allow evaluation of both divisions on the same b