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32 Cards in this Set
- Front
- Back
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Decentralized organization
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An organization in which decision making is spread throughout the organization rather than being confined to a few top executives. |
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Traceable fixed costs
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Fixed costs that can be identified with a particular segment and that arise because of the existence of the segment. |
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Common fixed cost
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A fixed cost that supports the operations of more than one segment but is not traceable in whole or in part to any one segment |
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Segment margin
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A margin obtained by deducting a segment's traceable fixed costs from the segment's contribution margin. |
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Responsibility centre
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Any business segment whose manager has control over cost or profit or the use of investment funds. |
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Investment centre
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A business segment whose manager has control over cost and revenue and also has control over the use of investment funds. |
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Profit centre
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A business segment whose manager has control over cost and revenue but has no control over the use of investment funds. |
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Cost centre
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A business segment whose manager has control over cost but has no control over revenue or the use of investment funds. |
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Return on investment (ROI)
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Operating income divided by average operating assets. ROI also equals margin multiplied by turnover. |
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Operating income
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Income before interest and income taxes have been deducted. |
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Operating assets
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Cash, accounts receivable, inventory, plant and equipment, and all other assets held for productive use in an organization. |
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Margin
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Operating income divided by sales. |
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Turnover
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The amount of sales generated in an investment centre for each dollar invested in operating assets. Sales divided by average operating assets. |
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Residual income
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The operating income that an investment centre earns above the required return on its operating assets. |
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Economic value added
(EVA®) |
A concept similar to residual income. |
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Balanced scorecard
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An integrated set of performance measures that is derived from and supports the organization’s strategy. |
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Transfer price
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The price charged when one division or segment provides goods or services to another division or segment of an organization. |
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Negotiated transfer price
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A transfer price agreed on between buying and selling divisions. |
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Range of acceptable
transfer prices |
The range of transfer prices within which the profits of both the selling division and the purchasing division would increase as a result of a transfer. |
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Market price
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The price being charged for an item on the open (intermediate) market. |
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Intermediate market
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A market in which a transferred product or service is sold in its present form to outside customers. |
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Quality of conformance
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The degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance. |
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Quality cost
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Costs that are incurred to prevent defective products from reaching customers or that are incurred as a result of defective units. |
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Prevention costs
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Costs incurred to keep defects from occurring. |
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Statistical process control
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A charting technique used to |
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Quality circles
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Small groups of employees who meet on a regular basis to discuss ways of improving quality. |
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Internal failure costs
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Costs that are incurred as a result of identifying defective products before they are shipped to customers. |
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External failure costs
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Costs that are incurred when a product or service that is defective is delivered to a customer. |
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Appraisal costs
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Costs that are incurred to identify defective products before the products are shipped to customers. |
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Quality cost report
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A report that details prevention costs, appraisal costs, and the costs of internal and external failures. |
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ISO 9000 standards
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Quality control requirements issued by the International Organization for Standardization. |
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Reciprocal method
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A method of allocating service department costs that gives full recognition to interdepartmental services. |
