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Chapter 12

Chapter 12. Responsibility Accounting, Quality Control, and Environmental Cost Management. Responsibility Accounting. Responsibility accounting is used to measure the performance of people and departments to foster goal congruence. Responsibility Centers.

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Chapter 12

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  1. Chapter 12 Responsibility Accounting, Quality Control, and Environmental Cost Management

  2. Responsibility Accounting Responsibility accounting is used to measure the performance of people and departments to foster goal congruence.

  3. Responsibility Centers A subunit in an organization whose manager is held accountable for specified financial results.

  4. Responsibility Centers Cost Center Segment has control over the incurrence of costs. Revenue Center Segment is responsible for the revenue of a unit. The Paint Department in an automobile plant. The Reservations Department of an airline.

  5. Investment Center Segment has control over profits and invested capital. A division of a large corporation. Responsibility Centers Profit Center Segment has control over both costs and revenues. Company-owned restaurant in a fast-food chain.

  6. Performance Reports

  7. Cost Allocation The process of assigning the costs in the cost pool to the cost objects is called cost allocation or cost distribution.

  8. Cost 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.

  9. Controllability InformationversusBlame MotivatingDesiredBehavior Behavioral Effects of Responsibility Accounting

  10. Segmented Reporting A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. Segmented reporting refers to the preparation of accounting reports by segment and for the organization as a whole.

  11. Segmented Reporting Divisions Aloha Hotels and Resorts • Maui Division Oahu Division Diamond Head Lodge Waikiki Sands Hotel Waimea Beach Resort • Units

  12. Segmented Reporting

  13. Key Features of Segmented Reporting • Contribution format. • Controllable versus uncontrollable expenses. • Segmented income statement.

  14. Cost of Quality Quality costs include the follows: • Prevention costs, • Appraisal costs, • Internal failure costs, and • External failure costs.

  15. Cost of Quality The opportunity cost of lost sales and decreased market share can represent a significant hidden cost.

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