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14 Cards in this Set
- Front
- Back
responsibility accounting
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a system that measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome
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profit center
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a responsibility center in which a manager is responsible for both revenues and costs
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investment center
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a responsibility center in which a manager is responsible for revenues, costs, and investments
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1. cost center
2. revenue center 3. profit center 4. investment center |
four major types of responsibility centers
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centralized decision making
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decision are made at the very top level, and lower-level managers are charged with implementing these decisions
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decentralized decision making
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allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility
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decentralization
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the practice of delegating or decentralizing decision-making authority to the lower levels
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operating income
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earnings before interest and income taxes
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margin
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the ratio of operating income to sales
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turnover
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sales / average operating assets
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residual income
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the difference between operating income and the minimum dollar return required on a company's operating assets
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economic value added
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after-tax operating income minus the total annual cost of capital
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transfer prices
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prices charged for goods produced by one division and transferred to another
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opportunity cost approach
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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
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