Chapter 11 Flashcards
(12 cards)
Decentralization
the degree of dispersion of responsibility within an organization
Cost center
An organizational unit responsible for producing products or providing services and controlling their costs
Advantages of decentralization
More efficient use of time, more relevant info, higher quality decisions, greater speed, better use of talent, increased motivation and allegiance
Disadvantages of decentralization
Loss of control, decreased goal congruence, increased need for coordination and formal communication, lack of managerial talent
Responsibility center
An organizational unit formally given the responsibility to carry out one or more tasks or achieve one or more outcomes (or both)
Types of responsibility centers
Service centers
Cost centers
Profit centers
Investment centers
Cost center
an organizational unit responsible for producing products or providing services and controlling their costs
Profit center
An organizational unit responsible for containing costs and earning revenues
Service center
An organizational unit primarily responsible for ensuring that health care-related services are provided to a population in a manner that meets the volume and quality requirements of the organization. It has no direct budgetary control.
Investment center
An organizational unit that has all the responsibilities of a traditional profit center and is also responsible for making a certain return on investment
Budget variance
The difference between what was planned (budgeted) and what was achieved (actual)
Most common types of budget variances
Revenue variances and expense variances
