Management Accounting Chapter 10 Decentralization Essay

3618 words - 15 pages

Chapter 10

Solutions to Questions

10-1 In a decentralized organization, decision-making isn’t confined to a few top executives, but rather is spread throughout the organization with managers at various levels making key decisions relating to their own spheres of responsibilities.

10-2 The benefits of decentralization include: (1) relieving top management from day-to-day problem solving and allowing them to focus their time on broader issues; (2) training lower-level managers in decision making, thereby preparing them to assume greater responsibility; (3) greater job satisfaction and greater incentive for lower-level managers; (4) better decisions, since ...view middle of the document...

This can happen any time an investment center’s ROI exceeds the minimum required rate of return for the company. The residual income approach overcomes this problem since any project whose rate of return exceeds the company’s minimum required rate of return will generate an increase in the investment center’s residual income.

10-9 A transfer price is the price charged for a transfer of goods or services between units of the same organization, such as two departments or divisions. Transfer prices are needed for performance evaluation.

Brief Exercise 10-1 (10 minutes)

|1. |[pic] |

|2. |[pic] |

|3. |[pic] |

Brief Exercise 10-2 (20 minutes)

|1. |[pic] |

|2. |[pic] |
Brief Exercise 10-2 (continued)

|3. |[pic] |
Brief Exercise 10-3 (10 minutes)

|Average operating assets (a) |£2,200,000 |
|Net operating income |£  400,000 |
|Minimum required return: 16% × (a) |    352,000 |
|Residual income |£    48,000 |
Exercise 10-4 (20 minutes)

1. ROI computations:


Eastern Division: [pic]

Western Division: [pic]

2. The manager of the Western Division seems to be doing the better job. Although her margin is three percentage points lower than the margin of the Eastern Division, her turnover is higher (a turnover of 3.5, as compared to a turnover of two for the Eastern Division). The greater turnover more than offsets the lower margin, resulting in a 21% ROI, as compared to an 18% ROI for the other division.

Notice that if you look at margin alone, then the Eastern Division appears to be the strongest division. This fact underscores the importance of looking at turnover as well as at margin in evaluating performance in an investment center.
Exercise 10-5 (30 minutes)

1. ROI computations:


Perth: [pic]

Darwin: [pic]

| 2. | |Perth...

Other assignments on Management Accounting Chapter 10 Decentralization

Kieso Essay

7986 words - 32 pages CHAPTER 1 Financial Reporting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE Topics Questions Cases 1. Global markets. 1 2. Environment of accounting. 2, 3, 4 4, 5, 7 3. Objective of financial reporting. 5, 6, 7, 8, 9, 10 2 4. Standard-setting organizations. 11, 12, 13, 14, 15, 16, 17, 18 1, 3, 6 5. Financial reporting challenges. 19, 20, 21, 22, 23, 24, 25 8, 9, 10

Financial Statements Essay

1525 words - 7 pages service is provided by Verizon. Once the company has identified the economic event, it is recorded in order to provide a history of the organizations financial activities. The accounting process includes the bookkeeping function that usually involves only the recording of economic events (Weygandt, 2008). Collectively, accounting involves the entire process of recording, identifying, and communicating economic events. Management uses


2621 words - 11 pages CHAPTER 1 THE CANADIAN FINANCIAL REPORTING ENVIRONMENT Multiple Choice—Conceptual Answer No. Description d 1. Accounting characteristics. a 2. Nature of financial accounting. c 3. Definition of financial accounting. a 4. Financial reporting entity. d 5. Efficient use of resources. d 6. Capital allocation process. c 7. Assessing management stewardship. c 8. Objectives of financial reporting. a 9. Role of


825 words - 4 pages . |Accounting |10% | |3. |Marketing |15% | |4. |Management |15% | |5. |Business Maths

Acct 2102 Review

263 words - 2 pages distinguishing features of managerial accounting? Explain the management functions. Know how to calculate Cost of Good Sold and Cost of Goods Manufactured. What is product cost, manufacturing costs and period costs? What are the three inventory accounts and how are they presented on the balance sheet? What is gross profit? What is the value chain? What is ERP? What is just-in-time inventory? What is TQM?
What is the balanced scorecard

Acceptance Of Islamic Accounting

951 words - 4 pages Chapter 3: Islamic Accounting Question: Do you think the Islamic accounting (process, transactions, development and etc.) will be increased or decreased? Why? The world accounting in Islam has many meanings according to the situation where it is mentioned and used. In Arabic dictionaries it refers to count and record the financial actions and transactions. Also, it refers to accountability and responsibility by the man self or by others

Research Papers

8621 words - 35 pages capital budgeting, performance management systems product planning and management cost accounting. The purpose of a management process is to ensure a disciplined and consistent approach to analysis and decision-making. They facilitate the use of a logical thought process that is consistent with the objectives of the firm. The capital budgeting process, for example, is based on financial market disciplines that encourage wise investment. Product


2895 words - 12 pages Segment Reporting: Tools for Management | | 5-7,11 | 5-16,19 | Jan. 10 | Chapter 6: Activity-Based Costing: A Tool to Aid Decision Making | Sino Beauty 2 | | 6-18 | Jan. 13 | EXAM REVIEW | | | | Jan. 14 | EXAM Chapters 1-6 | BRING SCANTRON | | | Jan. 15 | Chapter 9: Profit Planning Chapter 10: Flexible


4883 words - 20 pages financial instruments are not conventions in the sense described above because the specific choices made in practice are not arbitrary and reflect economics of the firm. Stability of conventions, as well as of economic features of accounting, depends on stability of the environment of financial reporting. Longer-term stability of an accounting practice—doubleentry, for example—should not be mistaken for a convention. Under Ijiri’s (1967, Chapter 5

General Motors

9412 words - 38 pages Motors 2013 GM led global sales for 77 consecutive years from 1931 through 2007. The company regained its position as the world's largest automaker, by vehicle unit sales, in 2011. Along the way, a failure to obtain government loans caused GM to file for Chapter 11 bankruptcy in June 2009, following the recession of 2008, 2009. On July 10, 2009, GM emerged from government backed Chapter 11 reorganization after an initial filing on June 8, 2009


926 words - 4 pages |Dull (9) |6 | | |Revenue Cycle |Hall (4-6, 8) | | | |Expenditure Cycle |Romney (10-12,14) | | | |Human Resource Management and Payroll Cycle

Similar Documents

Management Information System Essay

2113 words - 9 pages Class Lectures of Management Information Systems (MGT: 305) Introduction: System: System means interrelated set of elements. MIS: Management Information System means managing information resources in a systematic way. Chapter: 01 (Managing the Digital Firm) Q#01: Management challenges while building an information system: 1. 2. 3. 4. 5. Designing competitive and efficient system Understanding system requirements of global

Is And Work Group Essay

951 words - 4 pages Course Schedule Session 1 (January 12, 2013) Module 1 Topic The Accounting Environment: What is Accounting and Why is it Done? Activities Readings: Chapter 1 LO 1, 2, 3, 4, 5, 6 pages 1 - 23 Assignments: Lyryx Online Homework Assignment: Lab 1, Chapter 1 E1-3 (LO 2), E1-8 (LO 6) P1-6 (LO 1,2), P1-9 (LO1, 2, 6) P1-13 (LO 6), P1-16 (LO 1,2, 3) Due by Sunday, January 20 at 11:00 pm Tests/Exams: (None) Session 2 (January 19

Business And Innovation Essay

1260 words - 6 pages societal context. 7,8 Case: ITC e-Choupal 3 Developing the New Strategic Mindset • Strategic Innovation • Competing with Dual Business Models • Strategy as Ecology across different businesses 9, 10 Chapter 4 Case: Air France • Social Media as Change Agent • Adopting new technologies for new innovations 11, 12 Case: Cyworld 4 Reindustrializing The Planet • The procurement process, the supply chain, and collaborative commerce

Transfer Prices Essay

1287 words - 6 pages TRANSFER PRICING Overview The essential feature of decentralization in large firms is the creation of responsibility centers (e.g. cost, profit, or investment centers). The performance of these responsibility centers is evaluated on the basis of various accounting numbers, such as standard and actual cost, divisional profit or return on investment. A central role of the management accounting system therefore is to evaluate (i.e