Professional Documents
Culture Documents
ACCOUNTING
PPT 14 -1
Responsibility Accounting
PPT 14 -2
Learning Objectives
Define responsibility accounting
and describe the four types of
responsibility centers
PPT 14 -3
Responsibility Accounting
Responsibility accounting is a system that measures the
results of each responsibility center and compares those
results with some measure of expected or budgeted
outcome.
There are four major types of responsibility
centers:
Cost center
Revenue center
Profit center
Investment center
PPT 14 -4
10-5
Responsibility Accounting
Cost
Center
Cost, profit,
and investment
centers are all
known as
responsibility
centers.
Profit
Center
Investment
Center
Responsibility
Center
PPT 14 -5
10-6
Cost Center
A segment whose manager has
control over costs, but not over
revenues or investment funds.
PPT 14 -6
10-7
Profit Center
A segment whose
manager has control
over both costs and
revenues,
but no control over
investment funds.
Revenues
Sales
Interest
Other
Costs
Mfg. costs
Commissions
Salaries
Other
PPT 14 -7
10-8
Investment Center
Corporate Headquarters
A segment
whose manager
has control over
costs, revenues,
and investments
in operating
assets.
PPT 14 -8
10-9
Responsibility Centers
Investment
Centers
Operations
Vice President
Salty Snacks
Product Manger
Bottling Plant
Manager
Beverages
Product Manager
Warehouse
Manager
Finance
Chief FInancial Officer
Legal
General Counsel
Personnel
Vice President
Confections
Product Manager
Distribution
Manager
Cost
Centers
10-10
Responsibility Centers
Superior Foods Corporation
Corporate Headquarters
President and CEO
Operations
Vice President
Salty Snacks
Product Manger
Bottling Plant
Manager
Beverages
Product Manager
Warehouse
Manager
Finance
Chief FInancial Officer
Legal
General Counsel
Personnel
Vice President
Confections
Product Manager
Distribution
Manager
Profit
Centers
10-11
Responsibility Centers
Superior Foods Corporation
Corporate Headquarters
President and CEO
Operations
Vice President
Salty Snacks
Product Manger
Bottling Plant
Manager
Beverages
Product Manager
Warehouse
Manager
Finance
Chief FInancial Officer
Legal
General Counsel
Personnel
Vice President
Confections
Product Manager
Distribution
Manager
Cost
Centers
Management Hubs
Profit Centers.
Profit Center
Organize business into subunits, profit
Control escalators
Allocate asset use to subunits.
Evaluate on contribution margin and
Word List
Cost Behavior
Variable Costs.
Mixed Costs.
Semi-variable costs
change in total with
changes in
production level,
but not
proportionately.
PPT 14 -14
Terms to Recognize
Cost volume profit
analysis
Profit = Sales (S)
Variable Costs (VC)
Fixed Costs (FC)
Contribution Margin
(Sales Variable
Costs) Sales
PPT 14 -15
Cost-Volume-Profit Diagnostics
PPT 14 -16
Breakevent Point
Sales (in dollars) = Fixed Costs / Contribution
margin ratio
Sales (units) = Fixed Costs / Contribution
PPT 14 -17
Cost or
Revenue
($)
Quantity Produced
Break-Even Diagram
PPT 14 -18
Profit / Loss
Corridor
Variable
Costs
Cost or
Revenue
($)
Fixed Cost
Fixed Cost
Quantity Produced
Break-Even Diagram
PPT 14 -19
Break-Even Diagram
Profit / Loss
Corridor
Variable
Costs
Cost or
Revenue
($)
Fixed Cost
Quantity Produced
PPT 14 -20
Vocabulary
Differential costs and
revenue
Opportunity Costs.
Sunk cost.
PPT 14 -21
Functional-Based
Responsibility Accounting System
A functional-based responsibility accounting
system assigns responsibility to organizational
units and expresses performance measures in
financial terms.
Elements of a Functional-Based
Responsibility Accounting System
Organizational
Unit
Individual
in Charge
Responsibility
is Defined
Operating
Efficiency
Financial
Outcomes
Unit
Budgets
Standard
Costing
Static
Standards
Performance Measures
are Established
Currently
Attainable
Standards
PPT 14 -25
Elements of a Functional-Based
Responsibility Accounting System
Controllable
Costs
Financial
Efficiency
Performance
is Measured
Actual versus
Standard
Financial
Measures
Promotions
Profit
Sharing
Bonuses
Individuals are Rewarded
Based on
Financial Performance
Salary
Increases
PPT 14 -26
Activity-Based
Responsibility Accounting System
An activity-based responsibility accounting
system assigns responsibility to processes and
uses both financial and nonfinancial measures
of performance.
It is the responsibility accounting system
developed for those firms operating in
continuous improvement environments.
PPT 14 -27
Elements of an Activity-Based
Responsibility Accounting System
Process
Team
Responsibility
is Defined
Value
Chain
Financial
Optimal
Dynamic
Performance Measures
are Established
ProcessOriented
ValueAdded
PPT 14 -28
Elements of an Activity-Based
Responsibility Accounting System
Quality
Improvement
Time
Reductions
Performance
is Measured
Cost
Reductions
Trend
Measures
Promotions
Bonuses
Gainsharing
Salary
Increases
PPT 14 -29
Strategic-Based
Responsibility Accounting System
A strategic-based responsibility accounting system
(Balanced Scorecard) translates the mission and
strategy of an organization into operational
objectives and measures for four different
perspectives:
The financial perspective
The customer perspective
The process perspective
The infrastructure (learning and growth)
perspective
PPT 14 -30
Strategy
Strategy specifies how an organization matches its
own capabilities with the opportunities in the
marketplace to accomplish its objectives
A thorough understanding of the industry is critical
to implementing a successful strategy
PPT 14 -31
Elements of a Strategic-Based
Responsibility Accounting System
Customer
Financial
Responsibility
is Defined
Process
Communicate
Strategy
Alignment of
Objectives
Infrastructure
Performance Measures
are Established
Balanced
Measures
Link to
Strategy
PPT 14 -32
Elements of a Strategic-Based
Responsibility Accounting System
Customer
Measures
Financial
Measures
Performance
is Measured
Process
Measures
Infrastructure
Measures
Promotions
Bonuses
Gainsharing
Salary
Increases
PPT 14 -33
End of Week
PPT 14 -34