Managerial Accounting-Chapter 11 Decentralization

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  1. Decentralized Organization (p. 232)
    An organization in which decision-making authority is spread throughout the organization
  2. Responsibility Accounting (p. 235)
    accounting system that assigns responsibility to a manager for only those areas which are under that manager's control.
  3. Cost Center (p. 235)
    An organizational segment, or division, in which the manager has control over costs but not over revenue or investment decisions.
  4. Performance Report (p. 236)
    Provides key financial and nonfinancial measures of performance for a particular segment.
  5. Revenue Center (p. 236)
    An organizational segment, or division, in which the manager has control over revenue but not costs or investment decisions.
  6. Profit Center (p. 236)
    An organizational segment, or division, in which the manager has control over both costs and revenue but not investment decisions.
  7. Investment center (p. 236)
    An organizational segment, or division, in which the manager has control over costs, revenue, and investment decisions.
  8. Strategic business unit (SBU) (p. 236)
    Another term for investment center.
  9. Segmented Income Statements (p. 237)
    Reports that calculate income for each major segment of an organization in addition to the company as a whole.
  10. Segment Costs (p. 237)
    All costs attributable to a particular segment of an organization but only those costs that are actually caused by the segment.
  11. Common Costs (p. 237)
    Indirect costs that are incurred to benefit more than one segment and that cannot be directly traced to a particular segment or allocated in a reasonable manner.
  12. Segment Margin (p. 238)
    The profit margin of a particular segment of an organization, typically the best measure of long-term profitability.
  13. Return on Investment (p. 239)
    Measures the rate of return generated by an investment center's assets.
  14. Margin (p. 239)
    For each sales dollar, the percentage that is recognized as net profit.

    Is found by dividing an investment center's net operating income by its sales.
  15. Asset Turnover (p. 239)
    The measure of activity used in the ROI calculation;it measures the sales that are generated for a given level of assets.

    Is calculated by dividing an investment center's sales by its average operating assets during a period.

    It measures the sales that are generated for a given level of assets.
  16. Net Operating Income (p. 240)
    Net income from operations before interest and taxes.
  17. Operating Assets (p. 240)
    Typically include cash, accounts receivable, inventory, and the property, plant, and equipment needed to operate a business.
  18. Residual Income (p. 242)
    The amount of income earned in excess of a predetermined minimum rate of return on assets.

    Net Operating Income-(Average Operating Assets X Minimum Required Rate of Return)
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Managerial Accounting-Chapter 11 Decentralization
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Decentralization
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