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GEETANJALI GOEL 59
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Responsibility Centers
A responsibility center is an activity, such as a department, that a manager controls.
Types of Responsibility Centers
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COST CENTER A cost center is part of an organization that does not produce direct profit and adds to the cost of running a company.
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There are some significant advantages to classifying simple, straightforward divisions as cost centres, since cost is easy to measure. Because the cost centre has a negative impact on profit (at least on the surface) it is a likely target for rollbacks and layoffs when budgets are cut.
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PROFIT CENTER A business unit or department which is treated as a distinct entity enabling revenues and expenses to be determined so that profitability can be measured.
A profit center manager is held accountable for both
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What this means in terms of managerial responsibilities is that the manager has to drive the sales revenue generating activities which leads to cash inflows and at the same time control the cost (cash outflows) causing activities. This makes the profit center management more challenging than cost center management
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Budget
Report to Supervisor of Work Station 106Drill Press
Materials $ 3,200 $(80 ) $ 12,760 $ 110 Direct labor 14,200 170 87,300 880 Supervision 1,100 (50 ) 4,140 (78 ) Power, supplies, miscellaneous 910 24 3,420 92 Totals $19,410 $ 64 $107,620 $1,004 Report to Supervisor of Fabrication Department
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Report to Product Manager Appliances, European Region Sales Variable costs: Production Selling and administrative Total variable costs Contribution margin Direct fixed costs Product margin
$150.7 $ 5.9 38.7 1.9 $189.4 $ 7.8 $197.6 $(4.6 ) 98.5 (3.1 ) $ 99.1 $ (1.5 )