CHAPTER 12 Responsibility Accounting Operational Performance Measures and

CHAPTER 12 Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard Copyright © 2015 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Responsibility Accounting Responsibility accounting is used to measure the performance of people and departments to foster goal congruence. 12 -2

Responsibility Centers A subunit in an organization whose manager is held accountable for specified financial results. 12 -3

Responsibility Centers Cost Center Segment has control over the incurrence of costs. The Paint Department in an automobile plant. Revenue Center Segment is responsible for the revenue of a unit. The Reservations Department of an airline. 12 -4

Responsibility Centers Profit Center Segment has control over both costs and revenues. Company-owned restaurant in a fast-food chain. Investment Center Segment has control over profits and invested capital. A division of a large corporation. 12 -5

Performance Reports Show the budgeted and actual amounts, and the variances between these amounts, of key financial results appropriate for the type of responsibility center. 12 -6

Performance Reports 12 -7

Behavioral Effects of Responsibility Accounting Controllability Information versus Blame Motivating Desired Behavior 12 -8

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. 12 -9

Segmented Reporting Aloha Hotels and Resorts Maui Division Waimea Beach Resort Divisions • Oahu Division Diamond Head Lodge Waikiki Sands Hotel • Units 12 -10

Segmented Reporting 12 -11

Key Features of Segmented Reporting Contribution format. Controllable versus uncontrollable expenses. Segmented income statement. 12 -12

Operational Performance Measures in Today’s Manufacturing Environment Raw Material & Scrap Control l. Quality l. Lead time l. Cost of scrap l. Total cost Inventory Control l Average value l Average holding time l Ratio of inventory value to sales revenue 12 -13

Operational Performance Measures in Today’s Manufacturing Environment Machine Performance l Availability l Downtime l Maintenance records l Setup time Product Quality l Warranty claims l Customer complaints l Defective products l Cost of rework 12 -14

Operational Performance Measures in Today’s Manufacturing Environment Production Manufacturing cycle time Velocity Manufacturing cycle efficiency Delivery • % of on-time deliveries • % of orders filled • Delivery cycle time 12 -15

Operational Performance Measures in Today’s Manufacturing Environment Productivity l Aggregate productivity l Partial productivity Innovation and Learning l l Percentage of sales from new products Cost savings from process improvements 12 -16

Balanced Scorecard The balanced scorecard is a balanced approach to the area of performance evaluation. Employees are evaluated on a series of financial and nonfinancial measures in a variety of areas. 12 -17

The Balanced Scorecard Financial Customer Vision and Strategy Internal Operations Learning and Growth 12 -18

End of Chapter 12 12 -19