Chap012
Uploaded By Qasim Mughal http://world-best-free.blogspot.com/ Chapter 12
Segment Reporting, Decentralization, and the
Balanced Scorecard
Solutions to Questions
12-1
In a decentralized organization, decision-making authority isn’t confined to a few top executives, but rather is spread throughout the organization with lower-level managers and other employees empowered to make decisions.
12-2
The benefits of decentralization include:
(1) by delegating day-to-day problem solving to lower-level managers, top management can concentrate on bigger issues such as overall strategy; (2) empowering lower-level managers to make decisions puts decision-making authority in the hands of those who tend to have the most detailed and up-to-date information about day-to-day operations; (3) by eliminating layers of decision-making and approvals, organizations can respond more quickly to customers and to changes in the operating environment; (4) granting decision-making authority helps train lower-level managers for higher-level positions; and (5) empowering lower-level managers to make decisions can increase their motivation and job satisfaction.
12-3
The manager of a cost center has control over cost, but not revenue or the use of investment funds. A profit center manager has control over both cost and revenue. An investment center manager has control over
cost and revenue and the use of investment funds. 12-4
A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. Examples of segments include departments, operations, sales territories, divisions, and product lines.
12-5
Under the contribution approach, costs are assigned to a segment if and only if the costs are traceable to the segment (i.e., could be avoided if the segment were eliminated).
Common costs are not allocated to segments under the contribution approach.
12-6
A traceable cost of a segment is a cost that arises specifically because of the existence of that
Segment Reporting, Decentralization, and the
Balanced Scorecard
Solutions to Questions
12-1
In a decentralized organization, decision-making authority isn’t confined to a few top executives, but rather is spread throughout the organization with lower-level managers and other employees empowered to make decisions.
12-2
The benefits of decentralization include:
(1) by delegating day-to-day problem solving to lower-level managers, top management can concentrate on bigger issues such as overall strategy; (2) empowering lower-level managers to make decisions puts decision-making authority in the hands of those who tend to have the most detailed and up-to-date information about day-to-day operations; (3) by eliminating layers of decision-making and approvals, organizations can respond more quickly to customers and to changes in the operating environment; (4) granting decision-making authority helps train lower-level managers for higher-level positions; and (5) empowering lower-level managers to make decisions can increase their motivation and job satisfaction.
12-3
The manager of a cost center has control over cost, but not revenue or the use of investment funds. A profit center manager has control over both cost and revenue. An investment center manager has control over
cost and revenue and the use of investment funds. 12-4
A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. Examples of segments include departments, operations, sales territories, divisions, and product lines.
12-5
Under the contribution approach, costs are assigned to a segment if and only if the costs are traceable to the segment (i.e., could be avoided if the segment were eliminated).
Common costs are not allocated to segments under the contribution approach.
12-6
A traceable cost of a segment is a cost that arises specifically because of the existence of that