decentralization

• This system facilitates decentralization by providing about the performance, efficiency, and effectiveness of organizational subunits and their managers.

  Responsibility Accounting Systems
• produces responsibility reports that assist each successively higher level of management in evaluating the performance of subordinate managers and their respective organizational units.

  Responsibility Accounting Systems
• Budgeted and actual revenues

  monetary
• Capacity measures (theoretical and that used to compute predetermined overhead rates)


  non-monetary
• reflect the upward flow of information from operational units to company top management and illustrate the broadening scope of responsibility.

  Responsibility reports
• receive detailed information on the performance of their immediate areas of control and summary information on all organizational units for which they are responsible.

  Managers
• Reports at the lowest-level units are highly detailed, whereas more general information is reported to the top of the organization.
• desiring more detail than is provided in summary reports can obtain it by reviewing the responsibility reports prepared by their subordinates

  Upper-level managers
• identify, measure, and report on the performance of responsibility centers and their managers

  Responsibility accounting systems
• are generally classified according to their manager's scope of authority and type of financial responsibility: costs, revenues, profits, and/or asset base

  Responsibility centers
• is an organizational unit whose manager has the authority only to incur costs and is specifically evaluated on the basis of how well costs are controlled.

  cost center
• what is the largest cost center

  production department
• is strictly defined as an organizational unit that is responsible for the generation of revenues and has no control over setting selling prices or budgeting costs

  revenue center
• is calculated by multiplying the actual number of units sold by the difference between actual and budgeted sales prices

  sales price variance
• is calculated by multiplying the budgeted sales price by the difference between the actual and budgeted sales volumes.

  sales volume variance
• profit center


  is an organizational unit whose manager is responsible for generating revenues and managing expenses related to current activity.
• is an organizational unit whose manager is responsible for managing revenues and current expenses.

  investment center
• has the authority to acquire, use, and dispose of plant assets to earn the highest feasible rate of return on the center's asset base.

  center's manager