Post on 21-Jan-2016
Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard
CHAPTER 12
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Responsibility AccountingResponsibility AccountingResponsibility accounting is used to measure the performance of people and departments to foster goal congruence.
Responsibility accounting is used to measure the performance of people and departments to foster goal congruence.
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Responsibility CentersResponsibility CentersA subunit in an organization whose
manager is held accountable for specified financial results.
A subunit in an organization whose manager is held accountable for
specified financial results.
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Responsibility CentersResponsibility Centers Cost Center Segment has control over the
incurrence of costs.
Cost Center Segment has control over the
incurrence of costs.
The Paint DepartmentThe Paint Departmentin an automobile plant.in an automobile plant.
Revenue Center Segment
is responsiblefor the revenue of
a unit.
Revenue Center Segment
is responsiblefor the revenue of
a unit.
The ReservationsThe ReservationsDepartment of an airline.Department of an airline.
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Responsibility CentersResponsibility Centers
Profit Center Segment has control over both
costs and revenues.
Profit Center Segment has control over both
costs and revenues.
Company-owned Company-owned restaurant in a fast-food restaurant in a fast-food
chain.chain.
Investment Center
Segment has control over profits
and invested capital.
Investment Center
Segment has control over profits
and invested capital.
A division of aA division of alarge corporation.large corporation.
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Performance ReportsPerformance Reports
Show the budgeted and actual amounts, and the variances
between these amounts, of key financial results appropriate for the type of responsibility center.
Show the budgeted and actual amounts, and the variances
between these amounts, of key financial results appropriate for the type of responsibility center.
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Performance ReportsPerformance ReportsFebruary Year to Date February Year to Date February Year to Date
Company . . . . . . . . . . . . . . . . . . . . . . $30,660 $64,567 $30,716 $64,570 $56 F $ 3 FMaui Division . . . . . . . . . . . . . . . . . . $18,400 $38,620 $18,470 $38,630 $70 F $10 FOahu Division . . . . . . . . . . . . . . . . . . 12,260 25,947 12,246 25,940 14 U 7 UTotal profit . . . . . . . . . . . . . . . . . . . . $30,660 $64,567 $30,716 $64,570 $56 F $ 3 FOahu DivisionWaimea Beach Resort . . . . . . . . . . . $6,050 $12,700 $6,060 $12,740 $10 F $40 FDiamond Head Lodge. . . . . . . . . . . 2,100 4,500 2,050 4,430 50 U 70 UWaikiki Sands Hotel . . . . . . . . . . . . . 4,110 8,747 4,136 8,770 26 F 23 FTotal profit . . . . . . . . . . . . . . . . . . . . $12,260 $25,947 $12,246 $25,940 $14 U $ 7 UWaikiki Sands HotelGrounds and Maintenance . . . . . . . . ($45) ($90) ($44) ($90) $ 1 F —Housekeeping and Custodial . . . . . . (40) (90) (41) (90) 1 U —Recreational Services . . . . . . . . . . . . 40 85 41 88 1 F $ 3 F Hospitality . . . . . . . . . . . . . . . . . . . . 2,800 6,000 2,840 6,030 40 F 30 F Food and Beverage . . . . . . . . . . . . . 1,355 2,842 1,340 2,832 15 F 10 U Total profit . . . . . . . . . . . . . . . . . . . . $4,110 $8,747 $4,136 $8,770 $26 F $23 F Food and Beverage DepartmentBanquets and Catering . . . . . . . . . . . $600 $1,260 $605 $1,265 $ 5 F $ 5 F Restaurants . . . . . . . . . . . . . . . . . . . 1,785 3,750 1,760 3,740 25 U 10 U Kitchen. . . . . . . . . . . . . . . . . . . . . . . (1,030) (2,168) (1,025) (2,173) 5 F 5 U Total profit . . . . . . . . . . . . . . . . . . . . $1,355 $2,842 $1,340 $2,832 $15 U $10 U KitchenKitchen staff wages . . . . . . . . . . . . . ($80) ($168) ($78) ($169) $ 2 F $ 1 U Food . . . . . . . . . . . . . . . . . . . . . . . . (675) (1,420) (678) (1,421) 3 U 1 U Paper products. . . . . . . . . . . . . . . . . (120) (250) (115) (248) 5 F 2 F Variable overhead. . . . . . . . . . . . . . . (70) (150) (71) (154) 1 U 4 U Fixed overhead. . . . . . . . . . . . . . . . . (85) (180) (83) (181) 2 F 1 U Total expense . . . . . . . . . . . . . . . . . . ($1,030) ($2,168) ($1,025) ($2,173) $ 5 F $ 5 U
*Numbers w ithout parentheses denote profit; numbers w ith parentheses denote ex penses; numbers in thousands.
†F denotes fav orable v ariance; U denotes unfav orable v ariance.
Flexible Budget* Actual Results* Variance†
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Behavioral Effects of Responsibility Behavioral Effects of Responsibility AccountingAccounting
InformationversusBlame
Controllability
MotivatingDesiredBehavior
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Segmented ReportingSegmented Reporting
Segmented reporting refers to the preparation of accounting
reports by segment and for the organization as a whole.
A segment is any part or activity of an organization
about which a manager seeks cost, revenue, or profit data.
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Segmented ReportingSegmented ReportingDivisionsDivisions
•
Units•
Aloha Hotels and Resorts
Aloha Hotels and Resorts
Oahu DivisionOahu DivisionMaui DivisionMaui Division
Waikiki Sands Hotel
Waikiki Sands Hotel
Diamond Head Lodge
Diamond Head Lodge
Waimea Beach Resort
Waimea Beach Resort
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Segmented ReportingSegmented Reporting
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Key Features of Segmented Key Features of Segmented ReportingReporting
Contribution format. Controllable versus uncontrollable expenses. Segmented income statement.
Contribution format. Controllable versus uncontrollable expenses. Segmented income statement.
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Operational Performance Measures Operational Performance Measures in Today’s Manufacturing in Today’s Manufacturing EnvironmentEnvironment
Raw Material & Scrap Control
Quality Lead timeCost of scrapTotal cost
Inventory Control Average value Average holding
time Ratio of inventory
value to sales revenue
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Operational Performance Measures Operational Performance Measures in Today’s Manufacturing in Today’s Manufacturing EnvironmentEnvironment
Machine Performance
Availability Downtime Maintenance
records Setup time
Product Quality Warranty claims Customer
complaints Defective products Cost of rework
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Operational Performance Measures Operational Performance Measures in Today’s Manufacturing in Today’s Manufacturing EnvironmentEnvironment
ProductionManufacturing cycle
timeVelocityManufacturing cycle
efficiency
Delivery• % of on-time deliveries• % of orders filled• Delivery cycle time
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Operational Performance Measures Operational Performance Measures in Today’s Manufacturing in Today’s Manufacturing EnvironmentEnvironment
Productivity Aggregate
productivity Partial productivity
Innovation and Learning
Percentage of sales from new products
Cost savings from process improvements
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Balanced Scorecard
The balanced scorecard is a balanced approach to the area of performance evaluation. Employees are evaluated on a series of financial and nonfinancial measures in a variety of areas.
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The Balanced ScorecardThe Balanced ScorecardFinancial
Learning and Growth
Internal OperationsCustomer
Vision and
Strategy
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End of Chapter 12End of Chapter 12
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