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Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 12 Responsibility Accounting, Quality Control, and Environmental Cost Management
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Transcript of resbonsible accounting
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Chapter 12Chapter 12
Responsibility Accounting, Quality
Control, and Environmental Cost
Management
Responsibility Accounting, Quality
Control, and Environmental Cost
Management
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
1
Learning Objective
1
12-3
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.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
2
Learning Objective
2
12-5
Responsibility CentersResponsibility Centers
A 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.
12-6
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.
12-7
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.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
3
Learning Objective
3
12-9
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.
12-10
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†
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
4
Learning Objective
4
12-12
Cost AllocationCost Allocation
The process of assigning the costs in the cost pool to the cost objects is called cost allocation or cost distribution.
12-13
Cost Allocation BasesCost Allocation Bases
An allocation base is a measure of activity,
physical characteristic, or
economic characteristic that is associated with the
responsibility centers, which are the cost
objects in the allocation process.
12-14
Activity-Based Responsibility Activity-Based Responsibility AccountingAccounting
Traditional responsibility-accounting systems tend to focus on the financial performance measures of cost, revenue, and profit for subunits of the organization.
Activity-based costing systems associate costs with the activities that drive those costs. In activity-
based responsibility accounting attention is directed not only to costs incurred but also to the
activity creating the cost.
Activity-based costing systems associate costs with the activities that drive those costs. In activity-
based responsibility accounting attention is directed not only to costs incurred but also to the
activity creating the cost.
12-15
Behavioral Effects of Behavioral Effects of Responsibility AccountingResponsibility Accounting
InformationversusBlame
Controllability
MotivatingDesiredBehavior
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
5
Learning Objective
5
12-17
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.
12-18
Segmented ReportingSegmented Reporting
DivisionsDivisions•
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
12-19
Segmented ReportingSegmented Reporting
12-20
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.
12-21
Customer Profitability AnalysisCustomer Profitability Analysisand Activity-Based Costingand Activity-Based Costing
Let’s see, I need . . . Special credit terms, Small order lots, Special packing, Great field service, and JIT delivery.
We can handlethat - but we need
to quote a price thatreflects the value of these services.
CompanyCompanySales RepSales RepCustomerCustomer
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
6
Learning Objective
6
12-23
Total Quality ManagementTotal Quality Management
Quality
Design
ConformanceGrade
12-24
Cost of QualityCost of Quality
Quality costs include the follows:– Prevention costs,– Appraisal costs,– Internal failure costs, and– External failure costs.
Quality costs include the follows:– Prevention costs,– Appraisal costs,– Internal failure costs, and– External failure costs.
12-25
Cost of QualityCost of Quality
The opportunity cost of lost sales and decreased
market share can represent a
significant hidden cost.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
7
Learning Objective
7
12-27
Changing Views of Optimal Changing Views of Optimal Product QualityProduct Quality
Total quality costs
Failure costs
Prevention and appraisal costs
Minimum
0%
Costs
100%
Percentage of defective products
Traditional View
12-28
Changing Views of Optimal Changing Views of Optimal Product QualityProduct Quality
Costs
0%
Minimum
100%
Percentage of defective products
Failure costs
Prevention and appraisal costs
Total quality costs
Contemporary View
12-29
Identifying Quality Control ProblemsIdentifying Quality Control Problems
150
140
130
120
110
100
90
80
70
60
50
40
Type of product defect
30
20
10
0
Poor reception/ static on line
Too easily moves out of transmission
range
Power declines too
rapidlyFaulty casing
(easily broken)
Pareto Diagram
12-30
ISO 9000 StandardsISO 9000 Standards
The International Standards Organization (ISO), require that a manufacturer have a well-defined quality control system in place, and that the target level of product quality be maintained.
Sustain quality of product.Sustain quality of product.
Effective quality control system in place.Effective quality control system in place.
Provide purchaser confidence in the Provide purchaser confidence in the productproduct..
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Learning Objective
8
Learning Objective
8
12-32
Environmental Cost ManagementEnvironmental Cost Management
Private environmental costs are assumed by
a company.
Social environmental costs are assumed by
the public.
12-33
Environmental Cost ManagementEnvironmental Cost Management
Visible private environmental costs are measurable and
clearly identified environmental issues. Hidden private
environmental costs are caused by
environmental issues but have not been so
identified by the accounting system.
12-34
Environmental Cost StrategiesEnvironmental Cost Strategies
End-of-pipe
Process improvement
Prevention
12-35
End of Chapter 12End of Chapter 12
