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27 Cards in this Set
- Front
- Back
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What are decentralized organizations? |
Companies divided into smaller units, called divisions, segments, departments, or subunits, when they become too large to be managed effectively as a single unit |
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What is a cost center? |
A center that incurs cost without directly generating revenues |
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What is a profit Center? |
A center that generates revenues and incurs cost |
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What is an investment center? |
A center that generates revenues and incurs loss and its manager is also responsible for the Investments made in operating assets |
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What is a responsibility accounting system? |
A system that can be set up to control costs and evaluate managers performance by assigning cost to a manager is responsible for controlling them |
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What are controllable cost? |
Cost that a manager has the power to determine or at least significantly affect the amount incurred |
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What are uncontrollable costs? |
Cost that are not within the managers control or influence |
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What is a responsibility accounting budget? |
A budget typically based on the flexible budgeting approach and includes only controllable cost |
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What is a responsibility accounting performance report? |
A report that shows actual expenses that a manager is responsible for and their budgeted amounts |
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What is a departmental income statement? |
A common way to report profit Center performance |
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What are direct expenses? |
Cost readily traced to a department because they are incurred for that Department's sole benefit |
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What are indirect expenses? |
Costs that are incurred for the joint benefit of more than one Department; they cannot be readily traced to only one Department |
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What are four steps involved in preparing a departmental income statement? |
1. Accumulating revenues and direct expenses by Department 2. Allocating indirect expenses across departments 3. Allocating service department expenses to operating department 4. Preparing departmental income statements |
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What is the allocation cost formula? |
Percentage of allocation X total cost to allocate |
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What is the departmental contribution to overhead? |
A measure of the amount of sales Less Direct expenses |
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Indirect expenses are typically? |
Uncontrollable cost |
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What is the return on investment ratio? |
Investment center income ÷ investment center average invested assets |
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What is the residual income formula? |
Investment center income - Target investment center income |
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What is the return on investment formula? |
Profit margin X investment turnover |
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What is the profit margin ratio? |
Investment center income ÷ investment center sales |
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What is the profit margin? |
Income earned per dollar of sales |
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What is the investment turnover ratio? |
Investment center sales ÷ investment center average assets |
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What is the investment turnover? |
Something that measures how efficiently an investment center generate sales from it's invested assets |
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What is a balanced scorecard? |
A system of performance measures including non-financial measures used to assess company and division manager performance |
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What are four parts of a balanced scorecard? |
1. Customer: what do the customers think of us? 2. Internal processes: which of our operations are crucial to meeting customer needs? 3. Innovation and learning: how can we improve? 4. Financial: what do our owners think of us? |
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What is the cycle time formula? |
Process time + inspection time + move time + wait time |
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What is a cycle efficiency formula? |
value-added time ÷ cycle time |
