Exam (elaborations)
Chapter 11 Performance Measurement in Decentralized Organizations questions with answers.
- Course
- Institution
Chapter 11 Performance Measurement in Decentralized Organizations questions with answers.
[Show more]
Seller
Follow
Content preview
Chapter 11 Performance Measurement inDecentralized Organizations questions
with answers.
Decentralized organization ANS -Decision-making authority is spread throughout the organization
rather than being confined to a few top executives
Major advantages of decentralization: ANS -1. Top management can focus on bigger issues
2. Lower-level managers are more knowledgeable about day-to-day operations
3. Organizations respond quickly to customers and changes in the operating environment
4. Train lower-level managers for higher-level positions
5. Increase motivation and job satisfaction
Major disadvantages of decentralization: ANS -1. Decisions do not follow company's overall strategy
2. If decisions are made independently, coordination may be lacking
3. Lower-level manager's objectives clash with objectives of the entire organization
4. Hard to spread innovative ideas
Decentralized organizations need _____ that link lower-level mangers' decision-making authority with
accountability for the outcomes of those decisions. ANS -Responsibility accounting systems
Responsibility center ANS -Any business segment whose manager has control over and is accountable
for costs, revenues, or investments in operating assets
The three primary types of responsibility centers: ANS -1. Cost centers
2. Profit centers
3. Investment centers
, Cost center ANS -A business segment whose manager has control over cost but has no control over
revenue or investments in operating assets.
Purpose: To minimize costs while providing the level of products and service demanded by other parts
of the organization.
Measured by: standard cost variance and flexible budget variances
Examples: Accounting, financing, general administration, legal, personnel, and manufacturing facilities
Profit center ANS -A business segment whose manager has control over cost and revenue but has not
control over investments in operating assets.
Measured by: comparing actual profit to targeted profit or budgeted profit
Investment center ANS -A business segment who manager has control over cost, revenue, and
investments in operating assets.
Purpose: To earn an adequate return on invesmtent
Measured by: return on investment or residual income measures
Two methods for evaluating an investment center's performance ANS -Return on investment (ROI) and
residual income
Formula for Return on investment (ROI) ANS -(Net operating income/Average operating assets)
*Higher the ROI, the greater the profit earned per dollar invested in the segment's operating assets
Used as the key measure of investment center performance
Net operating income ANS -Income before interest and taxes and is sometimes referred to as EBIT
(earnings before interest and taxes)
Operating assets ANS -Cash, accounts receivable, inventory, plant and equipment, and all other assets
held for operating purposes.
Does not include: land held for future use, an investment in another company, or a building rented to
someone else
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller PROFESSORAILAH. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.39. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64438 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now