Chapter 12 Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard Mc. Graw-Hill/Irwin Copyright © 2014 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.
Learning Objective 1 1212 -
Responsibility Accounting Responsibility accounting to measure the is used performance of people and departments to foster goal congruence. 12 -3
Learning Objective 2 12 -
Responsibility Centers A subunit in an organization whose manager is held accountable for specified financial results. 12 -5
Responsibility Centers Cost Center Segment has control over the incurrence of costs. The Paint Department in an automobile plant. Revenue Center Segment is responsible for the revenue of a unit. The Reservations Department of an airline. 12 -6
Responsibility Centers Profit Center Segment has control over both costs and revenues. Company-owned restaurant in a fast-food chain. Investment Center Segment has control over profits and invested capital. A division of a large corporation. 12 -7
Learning Objective 3 12 -
Performance Reports Show the budgeted and actual amounts, and the variances between these amounts, of key financial results appropriate for the type of responsibility center. 12 -9
Performance Reports 12 -10
Learning Objective 4 12 -
Cost Allocation The process of assigning the costs in the cost pool to the cost objects is called cost allocation or cost distribution. 12 -12
Cost Allocation Bases An allocation base is a measure of activity, physical characteristic, or economic characteristic that is associated with the responsibility centers, which are the cost objects in the allocation process. 12 -13
Activity-Based Responsibility Accounting Traditional responsibility-accounting systems tend to focus on the financial performance measures of cost, revenue, and profit for subunits of the organization. Activity-based costing systems associate costs with the activities that drive those costs. In activitybased responsibility accounting, attention is directed not only to costs incurred but also to the activity creating the cost. 12 -14
Behavioral Effects of Responsibility Accounting Controllability Information versus Blame Motivating Desired Behavior 12 -15
Learning Objective 5 12 -
Segmented Reporting A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. Segmented reporting refers to the preparation of accounting reports by segment and for the organization as a whole. 12 -17
Segmented Reporting Aloha Hotels and Resorts Maui Division Waimea Beach Resort Divisions • Oahu Division Diamond Head Lodge Waikiki Sands Hotel • Units 12 -18
Segmented Reporting 12 -19
Key Features of Segmented Reporting Contribution format. Controllable versus uncontrollable expenses. Segmented income statement. 12 -20
Customer Profitability Analysis and Activity-Based Costing Let’s see, I need. . . Special credit terms, Small order lots, Special packing, Great field service, and JIT delivery. Customer We can handle that - but we need to quote a price that reflects the value of these services. Company Sales Rep 12 -21
Learning Objective 6 12 -
Operational Control Measures in Today’s Manufacturing Environment 12 -23
Operational Performance Measures in Today’s Manufacturing Environment Raw Material & Scrap Control l. Quality l. Lead time l. Cost of scrap l. Total cost Inventory Control l Average value l Average holding time l Ratio of inventory value to sales revenue 12 -24
Operational Performance Measures in Today’s Manufacturing Environment Machine Performance l Availability l Downtime l Maintenance records l Setup time Product Quality l Warranty claims l Customer complaints l Defective products l Cost of rework 12 -25
Operational Performance Measures in Today’s Manufacturing Environment Production Manufacturing cycle time Velocity Manufacturing cycle efficiency Delivery • % of on-time deliveries • % of orders filled • Delivery cycle time 12 -26
Operational Performance Measures in Today’s Manufacturing Environment Productivity l Aggregate productivity l Partial productivity Innovation and Learning l l Percentage of sales from new products Cost savings from process improvements 12 -27
Learning Objective 7 12 -
Balanced Scorecard The balanced scorecard is a balanced approach to the area of performance evaluation. Employees are evaluated on a series of financial and nonfinancial measures in a variety of areas. 12 -29
The Balanced Scorecard Financial Customer Vision and Strategy Internal Operations Learning and Growth 12 -30
End of Chapter 12 12 -31
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