Divisional Performance (1) Flashcards
What is divisionalisation a term for?
Separation of an organisaiton into divisions
What can a division represent?
A cost centre, profit centre an investment centre
A company with several divisions?
A decentralised organisation
Advantage of decentralisation (quickly)
Decisions made more quickly
Advantage of decentralisation (motivation)
Increased motivation of management
Advantage of decentralisation (quality)
Increased quality of decisions due to local knowledge
Advantage of decentralisation (bureaucracy)
Reduced head office bureaucracy
Advantage of decentralisation (management)
Better training for all levels of management
A good performance measure should include (goal congruence)
Provide incentive to divisional manager to make decisions which are in the best interests of the overall company
A good performance measure should include (accountable)
Only include factors for which the manager can be held accountable
A good performance measure should include (objectives)
Recognise the long-term objectives as well as short-term objectives of organisation
Manager’s area of responsibility and typical financial performance measure (cost centre)
Decisions over costs
Standard costing variance
Manager’s area of responsibility and typical financial performance measure (revenue centre)
Revenues only
Revenues
Manager’s area of responsibility and typical financial performance measure (profit centre)
Decisions over costs and revenues
Controllable profit
Manager’s area of responsibility and typical financial performance measure (investment centre)
Decisions over costs, revenues and assets
ROI and residual income
