financial&managerial accounting_15e williamshakabettner chap 22

8/14/2019 Financial&managerial accounting_15e williamshakabettner chap 22

http://slidepdf.com/reader/full/financialmanagerial-accounting15e-williamshakabettner-chap-22 1/17

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rightsMcGraw-Hill/Irwin

Responsibility AccountingResponsibility Accounting

and Transfer Pricingand Transfer PricingChapter 22



The accounting system provides informationabout resources used and outputs achieved.

The accounting system provides informationabout resources used and outputs achieved.

The Need for Information The Need for InformationAbout Responsibility CenterAbout Responsibility Center

PerformancePerformance

This information is used to:

Plan and allocate resources.

Control operations.

Evaluate the performanceof center managers.

22-2



An accounting system thatprovides information . . .

An accounting system thatprovides information . . .

Responsibility AccountingResponsibility AccountingSystemsSystems

Relating to theresponsibilities of

individual managers.

To evaluatemanagers on

controllable items.

22-4



Prepare budgets for each responsibility center.

Prepare timely performance reportscomparing actual amounts with budgeted amounts.

Measure performance of each responsibility center.


22-5



Amount of detail varies accordingto level in organization.

A department manager receives detailed

reports.

A department manager receives detailed

reports.

A store manager receivessummarized informationfrom each department.

A store manager receivessummarized informationfrom each department.


22-6



Revenue is easily andautomatically assigned to

specific departments using pointof sale entries from cash

registers.

ServiceDepartment

Assigning Revenue andAssigning Revenue andCosts to ResponsibilityCosts to Responsibility

CentersCenters

22-7



Two guidelines should be followed inallocating costs to the various parts

of a business . . .According to cost behavior patterns:

Fixed or variable.

According to whether the costsare directly traceable to thecenters involved.

Assigning Revenue andAssigning Revenue andCosts to ResponsibilityCosts to Responsibility

CentersCenters

22-8



No computer division means . . .

No computer division manager.

Traceable Fixed Costs Traceable Fixed Costs

Traceable fixed costsTraceable fixed costs would disappear over time if the center itself disappeared.

22-9



Common fixed costsCommon fixed costs arise because of arise because of overall operation of the company andoverall operation of the company and

are not due to the existence of aare not due to the existence of a

particular center.particular center.We still have aWe still have acompany president.company president.

Common Fixed CostsCommon Fixed Costs

No computer No computer division means . . .division means . . .

22-10



A higher transfer price for batteries

means . . .

. . . greater profits for the

Battery Division.

Transfer Prices Transfer Prices

The transfer price affects the profit measurefor both buying and selling divisions.


Auto Division

Batteries

Battery Division

22-13



. . . lower profits for the

Auto Division.




Auto Division

Batteries

Battery Division

A higher transfer price for batteries

means . . .

22-14



Many companies use theexternal market value

of goods transferredas the transfer price.


Transfer prices have no direct effect uponthe company’s overall net income.

22-15



Transfer prices have no direct effectupon the company’s overall net income.

When the externalmarket value of goods

transferred is unavailable . . .


Negotiatedtransfer

price

Cost-plustransfer

price

22-16



End of Chapter 22End of Chapter 22

22 17

financial&managerial accounting_15e williamshakabettner chap 22

Documents