Acct 3337- Ch. 10

Front 1

responsibility accounting

Back 1

a system that measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome

Front 2

profit center

Back 2

a responsibility center in which a manager is responsible for both revenues and costs

Front 3

investment center

Back 3

a responsibility center in which a manager is responsible for revenues, costs, and investments

Front 4

1. cost center
2. revenue center
3. profit center
4. investment center

Back 4

four major types of responsibility centers

Front 5

centralized decision making

Back 5

decision are made at the very top level, and lower-level managers are charged with implementing these decisions

Front 6

decentralized decision making

Back 6

allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility

Front 7

decentralization

Back 7

the practice of delegating or decentralizing decision-making authority to the lower levels

Front 8

operating income

Back 8

earnings before interest and income taxes

Front 9

margin

Back 9

the ratio of operating income to sales

Front 10

turnover

Back 10

sales / average operating assets

Front 11

residual income

Back 11

the difference between operating income and the minimum dollar return required on a company's operating assets

Front 12

economic value added

Back 12

after-tax operating income minus the total annual cost of capital

Front 13

transfer prices

Back 13

prices charged for goods produced by one division and transferred to another

Front 14

opportunity cost approach

Back 14

identifies the minimum price that a selling division would be willing to accept and the maximum price that the buying division would be willing to pay