Responsibility Accounting

Question 1

Balanced Scorecard

Answer 1

Evaluates Multiple Dimensions of business outcomes in a “Decentralized” environment. i.e. - a business with multiple segments.

Question 2

Balance Scorecard Critical Success Factors

Both Financial & Nonfinancial Results

Answer 2

F - Financial
I - Internal business process
C - Customer satisfaction
A - Advancement of Innovation & HR

Question 3

Contribution Reporting

Answer 3

Contribution Margin = measures excess of rev over cost

Contribution by Strategic Business Unit (SBU) refines
contribution margin reporting.

Controllable Margin = Difference between contribution margin and controllable fixed costs.

Controllable fixed costs - costs that managers can influence in less than 1 yr. (ex.-advertising and sales promotion).

Question 4

Types of Responsibility Units (aka SBUs-Strategic Business Units) examples

Answer 4

Cost SBU-Mgrs. responsible for controlling costs (not all costs are controllable - therefore this one has the least responsibility)

Revenue SBU-Mgrs. responsible for generating revenue
(mgrs. have more risk & difficulty because it is less controllable).

Profit SBU-Mgrs. responsible for producing a target profit Has both the responsibility of Cost & Revenue

Investment SBU - Stand Alone. Highest level of Responsibility - total return on assets invested