8/14/2019 Financial&managerial accounting_15e williamshakabettner chap 22
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Copyright © 2010 by The McGraw-Hill Companies, Inc. All rightsMcGraw-Hill/Irwin
Responsibility AccountingResponsibility Accounting
and Transfer Pricingand Transfer PricingChapter 22
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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.
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An accounting system thatprovides information . . .
An accounting system thatprovides information . . .
Responsibility AccountingResponsibility AccountingSystemsSystems
Relating to theresponsibilities of
individual managers.
To evaluatemanagers on
controllable items.
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Prepare budgets for each responsibility center.
Prepare timely performance reportscomparing actual amounts with budgeted amounts.
Measure performance of each responsibility center.
Responsibility AccountingResponsibility AccountingSystemsSystems
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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.
Responsibility AccountingResponsibility AccountingSystemsSystems
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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
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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
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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.
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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 . . .
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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.
The transfer price affects the profit measurefor both buying and selling divisions.
Auto Division
Batteries
Battery Division
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. . . lower profits for the
Auto Division.
Transfer Prices Transfer Prices
The transfer price affects the profit measurefor both buying and selling divisions.
The transfer price affects the profit measurefor both buying and selling divisions.
Auto Division
Batteries
Battery Division
A higher transfer price for batteries
means . . .
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Many companies use theexternal market value
of goods transferredas the transfer price.
Transfer Prices Transfer Prices
Transfer prices have no direct effect uponthe company’s overall net income.
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Transfer prices have no direct effectupon the company’s overall net income.
When the externalmarket value of goods
transferred is unavailable . . .
Transfer Prices Transfer Prices
Negotiatedtransfer
price
Cost-plustransfer
price
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End of Chapter 22End of Chapter 22
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