责任中心和财务管理课件

ResponsibilityCentersandFinancialControlChapter12ResponsibilityCentersandFinLearningObjective1

Describetheformandnatureofvarianceanalysisandapplyitsbasicinsights.LearningObjective1 DescribeVariancesWhatarevariances?Variancesaredifferencesbetweenactualandestimatedcosts.Varianceanalysisisanecessarysteptounderstandwhyadifferenceoccurred.VariancesWhatarevariances?First-LevelVariancesThefirst-levelvarianceforacostitemisthedifferencebetweentheactualandmasterbudgetcosts.Variancesare“favorable”iftheactualcostsarelessthanestimatedcosts.Variancesare“unfavorable”iftheactualcostsexceedsestimatedcosts.First-LevelVariancesThefirstFirst-LevelVariancesCanningCellularServices(000)

Master Actual

Budget

Costs

DifferenceDirectMaterial–WelcomePackage 25,000 29,700 4,700DirectLabor–SalesStaff 12,500 14,850 2,350–TechnicalStaff 10,000 10,890 890SupportCost–DataProcessing 3,000 3,960 960–SystemActivation 45,000

42,900

–2,100TotalCustomer-RelatedCosts 95,500 102,300 6,800First-LevelVariancesCanningCDecomposingVariancesWhatareflexiblebudgets?Flexiblebudgetsrecastcosttargetsintheplannedormasterbudgettoreflecttheactuallevelofproduction.Thisallowscomparisonsofactualresultstotargetsbasedontheachievedlevelofproduction.DecomposingVariancesWhatareDecomposingVariancesWhatareplanningvariances?Theyreflecttheeffectofthevolumechangebetweenthemasterbudgetandactualactivitylevelachieved.Whatareflexiblebudgetvariances?Theyshowthedifferencesbetweentheflexiblebudgetandtheactualresults.DecomposingVariancesWhatareDecomposingVariances

MasterBudget–FlexibleBudget=PlanningVarianceFlexibleBudget–ActualResults=FlexibleBudgetVariancePlanningvariancesandflexiblebudgetvariancesarecalledsecondaryvariances.DecomposingVariancesMasterBuDecomposingVariancesWhatisthedirectmaterialefficiencyorusagevariance?Itisactualquantityusedattargetorstandardpricelesstheflexiblebudgetallowanceattheplannedortargetprice.UsageVariance=(AQ–SQ)×SPWhatisthedirectmaterialpricevariance?PriceVariance=(AP–SP)×AQDecomposingVariancesWhatistDecomposingVariancesWhatistheefficiencyorusagevariancefordirectlaborcosts?EfficiencyVariance=(AH–SH)×SRWhatistheratevariancefordirectlaborcosts?RateVariance=(AR–SR)×AHSupportcostscanalsobeanalyzedindetail.DecomposingVariancesWhatistDecomposingVariancesSupportcostscanreflectflexibleorcapacity-relatedcosts.Thequantityofcapacity-relatedcostsmaynotchangefromperiodtoperiod,butthespendingonthemmayfluctuate.Whatareflexiblesupportcosts?Theyreflectoperationsthatareproportionaltothevolumeofactivity.DecomposingVariancesSupportcDecomposingVariances

Master Planning Flexible

Budget

Variance

BudgetDirectMaterial–WelcomePackage 25,000 2,500 27,500DirectLabor–SalesStaff 12,500 1,250 13,750–TechnicalStaff 10,000 1,000 11,000SupportCost–DataProcessing 3,000 300 3,300–SystemActivation 45,000

4,500 49,500TotalCustomer-RelatedCosts 95,500 9,550 105,050CanningCellularServices(000)DecomposingVariances DecomposingVariances

Flexible Actual

BudgetVariance

ResultsDirectMaterial–WelcomePackage 2,200 29,700DirectLabor–SalesStaff 1,100 14,850–TechnicalStaff –110 10,890SupportCost–DataProcessing 660 3,960–SystemActivation –6,600 42,900TotalCustomer-RelatedCosts –2,750 102,300CanningCellularServices(000)DecomposingVariances DecomposingVariancesThefollowinginformationrelatestoCanningCellularService:Theactualnumberofnewcustomerswere1,100,000.DirectMaterialsSQ:1AQ:1SP:$25AP:$27DirectLaborSalesStaffSH:.50AH:.45SR:$25AR:$30DecomposingVariancesThefolloDecomposingVariancesDirectLaborTechnicalStaffSH:.25AH:.22SR:$40AR:$45SupportCostDataProcessingSH:.20AH:.24SR:$15AR:$15SupportCostSystemActivationSH:.15AH:.12SR:$300AR:$325DecomposingVariancesDirectLaDecomposingVariancesMaterialsefficiencyvariance=0Materialspricevariance:($25SP–$27AP)×1,100,000=$2,200,000UFlexiblebudgetvariance=$2,200,000USalesstaffefficiencyvariance:(550,000SH–495,000AH)×$25=$1,375,000FDecomposingVariancesMaterialsDecomposingVariancesSalesstaffratevariance:($25SR–$30AR)×495,000=$2,475,000UFlexiblebudgetvariance=$1,100,000UTechnicalstaffefficiencyvariance:(275,000SH–242,000AH)×$40=$1,320,000FDecomposingVariancesSalesstaDecomposingVariancesTechnicalstaffratevariance:($40SR–$4AR)×242,000=$1,210,000UFlexiblebudgetvariance=$110,000F

Supportcostdataprocessingefficiency:variance(220,000SH–264,000AH)×$15=$660,000URatevariance=0Flexiblebudgetvariance=$660,000UDecomposingVariancesTechnicalDecomposingVariancesSupportcostsystemactivationefficiencyvariance:(165,000SH–132,000AH)×$300=$9,900,000FSupportcostsystemactivationratevariance($300SR–$325AR)×132,000=$3,300,000UFlexiblebudgetvariance=$6,600,000FDecomposingVariancesSupportcDecomposingVariancesMasterBudgetFlexibleBudgetActualResultsPlanningVarianceFlexibleBudgetVarianceTotalVarianceDecomposingVariancesMasterFleDecomposingVariancesUsageVarianceFlexibleBudgetVariance

ActualQuantity×StandardPriceStandardQuantity×StandardPriceActualQuantity×ActualPricePriceVarianceDecomposingVariancesUsageVarDecomposingVariancesSecondLevelVariancesPlanningvariancesFlexiblebudgetvariancesFirstLevelVariancesDifferencebetweentheactualandmasterbudgetcostsThirdLevelVariancesUseandpricevariancesDecomposingVariancesSecondLeLearningObjective2

Showwhyorganizationsuseresponsibilitycenters.LearningObjective2 ShowwhyDecentralizationWhatarecentralizedorganizations?Organizationswhichreservemostofthedecision-makingpowerforseniorexecutives.Centralizationworkseffectivelyinorganizationswithstableenvironments.DecentralizationWhatarecentrDecentralizationWhataredecentralizedorganizations?Organizationswhichdelegateagooddealofthedecision-makingauthoritytolower-levelmanagers.Decentralizedorganizationsareeffectiveinenvironmentsrequiringquickresponsestochange.DecentralizationWhataredecenDecentralizationThreeconditionsarenecessaryforeffectivedecentralization:Employeesmustbegiven,andaccept,theauthorityandresponsibilitytomakedecisions.DecentralizationThreeconditioDecentralizationEmployeesmusthavethetrainingandskillstheyneedtoacceptthedecisionmakingresponsibility.Theorganizationmusthaveasysteminplacethatguidesandcoordinatestheactivitiesofdecentralizeddecisionmakers.DecentralizationEmployeesmustControllingOperationsThemajorpurposeofdecentralizationistogivedecisionmakerstheresponsibilitytomakeoperatingdecisions.Thiscreatesaneedforoperationscontrol.Whatisthefocusofoperationscontrol?Itfocusesonfindingthebestoperatingdecisions.ControllingOperationsThemajoControllingOperationsWhatisthefocusoffinancialcontrol?Itfocusesonanoverallassessmentofhowwelloperationscontrolisworkingtoimprovefinancialperformance.ControllingOperationsWhatisLearningObjective3

Recognizethecommonformsofresponsibilitycenters.LearningObjective3 RecognizeResponsibilityCentersWhatisaresponsibilitycenter?Itisanorganizationunitforwhichamanagerismaderesponsible.Thecenter’smanagerandsupervisorestablishspecificandmeasurablegoalsfortheresponsibilitycenter.Thegoalsshouldpromotethelong-terminterestoftheorganization.ResponsibilityCentersWhatisResponsibilityCentersResponsibilitycentersareclassifiedintofourtypes:CostcentersRevenuecentersProfitcentersInvestmentcentersResponsibilityCentersResponsiResponsibilityCentersWhatisacostcenter?Itisaresponsibilitycenterwhoseemployeescontrolcostsbutdonotcontrolitsrevenuesorinvestmentlevel.ResponsibilityCentersWhatisResponsibilityCentersWhatisarevenuecenter?Itisaresponsibilitycenterwhosememberscontrolrevenuesbutdonotcontrolthecostoftheproductorservicetheysellorthelevelofinvestmentintheresponsibilitycenter.ResponsibilityCentersWhatisResponsibilityCentersWhatisaprofitcenter?Itisaresponsibilitycenterwhosemanagerandotheremployeescontrolboththerevenuesandthecostsoftheproductorservicetheysellordeliver.ResponsibilityCentersWhatisResponsibilityCentersWhatisaninvestmentcenter?Itisaresponsibilitycenterwhosemanagerandotheremployeescontroltherevenues,costs,andthelevelofinvestmentintheresponsibilitycenter.ResponsibilityCentersWhatisLearningObjective4

Identifytheissuestoconsiderandbasictoolstouseinassessingtheperformanceofaresponsibilitycenter.LearningObjective4 IdentifyEvaluatingResponsibilityCentersUnderlyingtheaccountingclassificationsofresponsibilitycentersistheconceptofcontrollability.Thecontrollabilityprincipleassertsthatpeopleshouldonlybeheldaccountableforresultsthattheycancontrol.Itisoftendifficulttoapplythecontrollabilityprinciple.EvaluatingResponsibilityCentEvaluatingResponsibilityCentersWhataresomeproblemsassociatedwithcontrollability?jointlyearnedrevenuesand/orjointlyincurredcostsintricate,andoftenarbitrary,accountingproceduresEvaluatingResponsibilityCentLearningObjective5

Assesstheissuesandproblemscreatedbyrevenueandcostinteractionsinevaluatingtheperformanceofanorganizationunit.LearningObjective5 AssessthUsingSegmentMarginReportsWhatisasegmentmargin?Itisthelevelofcontrollableprofitreportedbyanorganizationalunitorproductline.UsingSegmentMarginReportsWhUsingSegmentMarginReportsRevenue $950,000 $1,250,000 $2,200,000VariableCosts 750,000

950,000

1,700,000ContributionMargin $200,000 $300,000 $500,000OtherCosts 75,000

60,000

135,000SegmentMargin $125,000 $240,000 $365,000AllocatedCosts 70,000

80,000

150,000Income $55,000 $160,000 $215,000UnallocatedCosts 300,000OrganizationProfit ($85,000)NewCarSalesUsedCarSalesTotalUsingSegmentMarginReportsReUsingSegmentMarginReportsWhattypeofproblemcanoccurwhenorganizationsevaluateresponsibilitycentersasprofitcenters?identifyingresponsibilityforthecontrolofsalesandcostsUsingSegmentMarginReportsWhUsingSegmentMarginReportsOrganizationsusetwodifferentapproachestoevaluatesegmentmarginnumbers:PastperformanceIsperformancethisperiodreasonable,givenpastexperience?ComparableorganizationsHowdoesperformancecomparetosimilarorganizations?UsingSegmentMarginReportsOrUsingSegmentMarginReportsWhataresomelimitationsofsegmentmarginreporting?Marginscanbehighlyaggregatedsummaries.Somesegmentreportscontainarbitrary,orsoft,numbers.Revenuefiguresoftenreflectassumptionsandallocationsthatcanbemisleading.UsingSegmentMarginReportsWhUsingSegmentMarginReportsBecauseoftheselimitations,interpretingsegmentmarginsshouldbedonecarefully.Othercriticalsuccessfactorsshouldbeusedaswelltoassessperformance.UsingSegmentMarginReportsBeLearningObjective6

Identifythetransfer-pricingalternativesavailabletoorganizationsandthecriteriaforchoosingatransferpricingalternative.LearningObjective6 IdentifyTransferPricingWhatistransferpricing?Itisasetoftoolsandmethodsusedtoattributerevenuesearnedbytheorganizationtoorganizationsub-units.TransferPricingWhatistransfTransferPricingTransferpricingcanbeveryarbitrary,especiallyifthereisahighdegreeofinteractionamongtheresponsibilitycenters.TransferPricingTransferpriciTransferPricingInterrelationshipsBodyShopDepartmentServiceDepartmentLeasingDepartmentUsedCarDepartmentNewCarDepartmentNewCarPreparationRepairsRepairsNewCarPreparationUsedCarsUsedCarsUsedCarsTransferPricingInterrelationApproachestoTransferPricingTherearefourapproachestotransferpricing:Market-BasedCost-BasedNegotiatedAdministeredApproachestoTransferPricingApproachestoTransferPricingMarket-BasedTransferPricingIfagoodexternalmarketexistsforthetransferredproductorservice,thenmarketpricesarethemostappropriatebasisforpricing.Unfortunately,thesemarketswithwell-definedpricesseldomexist.ApproachestoTransferPricingApproachestoTransferPricingCost-Based

TransferPricesVariablecostplusamarkupFullcostFullcostplusamarkupApproachestoTransferPricingApproachestoTransferPricingWhataresomeconcernsaboutcost-basedtransferprices?Cost-basedtransferpricesdonotprovidetheappropriateeconomicguidancewhenoperationsarecapacityconstrained.Theydonotfocusontheintentofthesystem,whichistoallowcalculationofunitincomes.ApproachestoTransferPricingApproachestoTransferPricingEconomistsarguethatonlymarginalcosttransferpricesareoptimal.Ifthetransferpriceishigherthanthemarginalcost…thesupplyingunitwantstosellmorethantheoptimalquantity,andthepurchasingunitwantstobuyfewerthantheoptimalquantity.ApproachestoTransferPricingApproachestoTransferPricingNegotiated

TransferPricesSupplyingandreceivingresponsibilitycentersnegotiateprices.Pricesreflectbothnegotiatingskillsandeconomicconsiderations.Optimaltransferpriceisthethe

netrealizablevalue

ofthelastunitsuppliedforallunitssupplied.ApproachestoTransferPricingApproachestoTransferPricingNegotiated

TransferPricesReflecttheaccountabilityandcontrollabilityprinciplesunderlyingresponsibilitycentersCaneasilyleadtodecisionsthatdonotprovidethegreatesteconomicbenefitsApproachestoTransferPricingApproachestoTransferPricingAdministered

TransferPricesPricessetbyarule,policy,oranarbitratorEasytoadministerArbitraryTendtoviolatethespiritoftheresponsibilityapproachApproachestoTransferPricingLearningObjective7

Usereturnoninvestmentandeconomicvalueaddedasfinancialcontroltools.LearningObjective7 UsereturEfficiencyandProductivityElementsofROIROI=OperatingIncome÷InvestmentROI=OperatingIncome

×

SalesSalesInvestmentROI=ReturnonSales×AssetTurnover=Efficiency×ProductivityEfficiencyandProductivityElEfficiencyandProductivityElementsofROIWhatisefficiency?Itisameasureofanorganization’sabilitytocontrolcosts.O