Professional Documents
Culture Documents
Decision Rights –
Input Mix – Labor, Material, Supplies
Performance Measures –
Minimize total cost for a fixed output
Maximize output for a given “cost budget”
Typically used when –
RC manager can measure output & quality of output
knows cost functions, optimal input mix
can set optimal quantity and appropriate rewards
12/08/21 hmahesh45@yahoo.com; VIM Pune 7
2. Expenses Center –
2.1)Engineered Exp. Center e.g. Production Department
Inputs Output
RC’s (Money-profit
(Money spent for
TASK Earned out of sales)
earning profits)
• Provides training ground for general mgt. as RC’s acts as mini Cos’.
• Enhances profit consciousness with every expense made.
(mktg. mgr. will tend to authorize promotional
expenditure which increases the sales).
Net Profit
2) Return on Capital Employed = ------------------------- * 100
Capital Employed
Net Profit
3) Return on Shareholders’ Equity = ---------------- * 100
Equity Capital
(shareholders worth maximization may not be suitable measure for RC’s performance evaluation
Because it is consolidated effect of entire company)
WACC (%) 19 18 19 22
EVA
12/08/21 351.58 255.46
hmahesh45@yahoo.com; VIM Pune 92.72 98
31
Thank You….