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Premium member Presentation Transcript Responsibility centers SUBMIITIED TO: SUBMITTIED BY: SIMRAN MADAM RAJLEEN KAUR MBA (IST SEM) : Responsibility centers SUBMIITIED TO: SUBMITTIED BY: SIMRAN MADAM RAJLEEN KAUR MBA (IST SEM)CONTENT : * Introduction * Definition * Types *Advantage : CONTENT : * Introduction * Definition * Types *AdvantageIntroduction: The responsibility centers represent the sphere of authority or decision point in an organization .for effective control, a large firm is usually divided into meaningful segments ,departments or divisions . : Introduction: The responsibility centers represent the sphere of authority or decision point in an organization .for effective control, a large firm is usually divided into meaningful segments ,departments or divisions .What is a responsibility center? *In simple words: an organizational unit for which a manager is made responsible. *Examples: A specific store in a chain of grocery stores. *A work-station in a production line manufacturing automobile batteries. : What is a responsibility center ? * In simple words: an organizational unit for which a manager is made responsible. *Examples: A specific store in a chain of grocery stores. *A work-station in a production line manufacturing automobile batteries.TYPES : for the purposes of evaluating financial performance and control , the responsibility centers are generally classified in to three categories: 1) cost or expenses centre 2) profit centre 3) investment centre : TYPES : for the purposes of evaluating financial performance and control , the responsibility centers are generally classified in to three categories: 1) cost or expenses centre 2) profit centre 3) investment centre1) COST OR EXPENSE CENTRE: *Responsibility centers whose employees control costs, but Do not control their revenues or investment level. Examples: Production department in a manufacturing unit, a dry cleaning business. : 1) COST OR EXPENSE CENTRE: * Responsibility centers whose employees control costs , but Do not control their revenues or investment level. Examples: Production department in a manufacturing unit, a dry cleaning business.Two types of costs: 1)Engineered: those costs that can be reasonably associated with a cost center – direct labor, direct materials, telephone/electricity consumed, office supplies. 2)Discretionary: where a direct relationship between a cost unit and expenses cannot be reasonably made; Management allocates them on a discretionary basis (e.g. depreciation expenses for machines utilized). : Two types of costs: 1)Engineered: those costs that can be reasonably associated with a cost center – direct labor, direct materials, telephone/electricity consumed, office supplies. 2)Discretionary: where a direct relationship between a cost unit and expenses cannot be reasonably made; Management allocates them on a discretionary basis (e.g. depreciation expenses for machines utilized).2)Profit Centers: *Managers of profit centers control both the revenues and costs of the product or service they deliver. *It is like an independent business except it is part of a larger organization (e.g. departmental stores of larger chains – Wal Mart, restaurants, corporate hotels such as Hilton). * The store manager would have responsibility for pricing, product selection, and promotion: 2)Profit Centers: *Managers of profit centers control both the revenues and costs of the product or service they deliver. *It is like an independent business except it is part of a larger organization (e.g. departmental stores of larger chains – Wal Mart, restaurants, corporate hotels such as Hilton). * The store manager would have responsibility for pricing, product selection, and promotion*Cost for these units vary depending on ability to control labor, waste, and hours. *Revenues also will vary depending on the unit’s service level, location, etc. *In other words, local discretion would affect revenues and costs. *Investments and some costs (e.g. centralized purchasing). *Therefore, profits represent a broader index of both corporate and local decisions. : *Cost for these units vary depending on ability to control labor, waste, and hours. *Revenues also will vary depending on the unit’s service level, location, etc. *In other words, local discretion would affect revenues and costs. *Investments and some costs (e.g. centralized purchasing). *Therefore, profits represent a broader index of both corporate and local decisions.Suitability of profit centers: 1) there exists a decentralized form of organization 2) The divisional manager has access to all relevant information needed for decision making. 3)The divisional manger is sufficiently independent. 4) a definite measure of performance is available. Advantages : 1)it may quicken the decision making process as these need not be referred to top management. 2)It helps in training divisional managers for top management responsibilities.: Suitability of profit centers: 1) there exists a decentralized form of organization 2) The divisional manager has access to all relevant information needed for decision making. 3)The divisional manger is sufficiently independent. 4) a definite measure of performance is available. Advantages : 1)it may quicken the decision making process as these need not be referred to top management. 2)It helps in training divisional managers for top management responsibilities.Disadvantages: 1)loss of top management control over different divisions. 2)too much emphasis on short term profitability . 3) transfer pricing problems amongst profit centre's. 3) INVESTMENT CENTRE: *Responsibility centers whose managers and employees control revenues, costs, and the level of investment. *It is also like an independent business (common when an organization acquires another organization – e.g:Sears financial centers). : Disadvantages: 1)loss of top management control over different divisions. 2)too much emphasis on short term profitability . 3) transfer pricing problems amongst profit centre's. 3) INVESTMENT CENTRE: *Responsibility centers whose managers and employees control revenues, costs, and the level of investment. *It is also like an independent business (common when an organization acquires another organization – e.g:Sears financial centers).Investment centre is two types: 1)return on investment/capital employed 2) economic value added 1) Return on investment/capital employed : return on capital employed establishes the relationship b/w profit and capital employed .the term capital employed refers to the total investment made in the investment centre /business. however ,net capital employed comprises the total assets used less its current liabilities. : Investment centre is two types: 1)return on investment/capital employed 2) economic value added 1) Return on investment/capital employed : return on capital employed establishes the relationship b/w profit and capital employed .the term capital employed refers to the total investment made in the investment centre /business. however ,net capital employed comprises the total assets used less its current liabilities. ROI / Capital employed = Net profit ------------------- *100 Capital employed 2) Economic value added/residual income approach: EVA has been considered as a better measure of divisional performance as compared to the return on assets (ROA) and ROI. : ROI / Capital employed = Net profit ------------------- *100 Capital employed 2) Economic value added/residual income approach: EVA has been considered as a better measure of divisional performance as compared to the return on assets (ROA) and ROI. TRANSFER PRICES A transfer price is a price used to measure the price of good or service furnished by a profit centre to other responsibility centre's within a company. TYPES OF TRANSFER PRICES: 1) COST PRICE 2) COST PLUS 3) Shared profit relative to the cost 4)Market price 5) Standard price : TRANSFER PRICES A transfer price is a price used to measure the price of good or service furnished by a profit centre to other responsibility centre's within a company. TYPES OF TRANSFER PRICES: 1) COST PRICE 2) COST PLUS 3) Shared profit relative to the cost 4)Market price 5) Standard priceADVANTAGE OF RESPONSIBILTY ACCOUNTING: 1) assigning of responsibility 2) Improves performance 3) Helpful in cost planning 4) Delegation and control 4)Helpful in decision making : ADVANTAGE OF RESPONSIBILTY ACCOUNTING : 1) assigning of responsibility 2) Improves performance 3) Helpful in cost planning 4) Delegation and control 4)Helpful in decision making You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
social responsibities aSGuest130924 Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: Embed: Flash iPad Dynamic Copy Does not support media & animations Automatically changes to Flash or non-Flash embed WordPress Embed Customize Embed URL: Copy Thumbnail: Copy The presentation is successfully added In Your Favorites. Views: 38 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: March 30, 2012 This Presentation is Public Favorites: 0 Presentation Description social responsibilties Comments Posting comment... Premium member Presentation Transcript Responsibility centers SUBMIITIED TO: SUBMITTIED BY: SIMRAN MADAM RAJLEEN KAUR MBA (IST SEM) : Responsibility centers SUBMIITIED TO: SUBMITTIED BY: SIMRAN MADAM RAJLEEN KAUR MBA (IST SEM)CONTENT : * Introduction * Definition * Types *Advantage : CONTENT : * Introduction * Definition * Types *AdvantageIntroduction: The responsibility centers represent the sphere of authority or decision point in an organization .for effective control, a large firm is usually divided into meaningful segments ,departments or divisions . : Introduction: The responsibility centers represent the sphere of authority or decision point in an organization .for effective control, a large firm is usually divided into meaningful segments ,departments or divisions .What is a responsibility center? *In simple words: an organizational unit for which a manager is made responsible. *Examples: A specific store in a chain of grocery stores. *A work-station in a production line manufacturing automobile batteries. : What is a responsibility center ? * In simple words: an organizational unit for which a manager is made responsible. *Examples: A specific store in a chain of grocery stores. *A work-station in a production line manufacturing automobile batteries.TYPES : for the purposes of evaluating financial performance and control , the responsibility centers are generally classified in to three categories: 1) cost or expenses centre 2) profit centre 3) investment centre : TYPES : for the purposes of evaluating financial performance and control , the responsibility centers are generally classified in to three categories: 1) cost or expenses centre 2) profit centre 3) investment centre1) COST OR EXPENSE CENTRE: *Responsibility centers whose employees control costs, but Do not control their revenues or investment level. Examples: Production department in a manufacturing unit, a dry cleaning business. : 1) COST OR EXPENSE CENTRE: * Responsibility centers whose employees control costs , but Do not control their revenues or investment level. Examples: Production department in a manufacturing unit, a dry cleaning business.Two types of costs: 1)Engineered: those costs that can be reasonably associated with a cost center – direct labor, direct materials, telephone/electricity consumed, office supplies. 2)Discretionary: where a direct relationship between a cost unit and expenses cannot be reasonably made; Management allocates them on a discretionary basis (e.g. depreciation expenses for machines utilized). : Two types of costs: 1)Engineered: those costs that can be reasonably associated with a cost center – direct labor, direct materials, telephone/electricity consumed, office supplies. 2)Discretionary: where a direct relationship between a cost unit and expenses cannot be reasonably made; Management allocates them on a discretionary basis (e.g. depreciation expenses for machines utilized).2)Profit Centers: *Managers of profit centers control both the revenues and costs of the product or service they deliver. *It is like an independent business except it is part of a larger organization (e.g. departmental stores of larger chains – Wal Mart, restaurants, corporate hotels such as Hilton). * The store manager would have responsibility for pricing, product selection, and promotion: 2)Profit Centers: *Managers of profit centers control both the revenues and costs of the product or service they deliver. *It is like an independent business except it is part of a larger organization (e.g. departmental stores of larger chains – Wal Mart, restaurants, corporate hotels such as Hilton). * The store manager would have responsibility for pricing, product selection, and promotion*Cost for these units vary depending on ability to control labor, waste, and hours. *Revenues also will vary depending on the unit’s service level, location, etc. *In other words, local discretion would affect revenues and costs. *Investments and some costs (e.g. centralized purchasing). *Therefore, profits represent a broader index of both corporate and local decisions. : *Cost for these units vary depending on ability to control labor, waste, and hours. *Revenues also will vary depending on the unit’s service level, location, etc. *In other words, local discretion would affect revenues and costs. *Investments and some costs (e.g. centralized purchasing). *Therefore, profits represent a broader index of both corporate and local decisions.Suitability of profit centers: 1) there exists a decentralized form of organization 2) The divisional manager has access to all relevant information needed for decision making. 3)The divisional manger is sufficiently independent. 4) a definite measure of performance is available. Advantages : 1)it may quicken the decision making process as these need not be referred to top management. 2)It helps in training divisional managers for top management responsibilities.: Suitability of profit centers: 1) there exists a decentralized form of organization 2) The divisional manager has access to all relevant information needed for decision making. 3)The divisional manger is sufficiently independent. 4) a definite measure of performance is available. Advantages : 1)it may quicken the decision making process as these need not be referred to top management. 2)It helps in training divisional managers for top management responsibilities.Disadvantages: 1)loss of top management control over different divisions. 2)too much emphasis on short term profitability . 3) transfer pricing problems amongst profit centre's. 3) INVESTMENT CENTRE: *Responsibility centers whose managers and employees control revenues, costs, and the level of investment. *It is also like an independent business (common when an organization acquires another organization – e.g:Sears financial centers). : Disadvantages: 1)loss of top management control over different divisions. 2)too much emphasis on short term profitability . 3) transfer pricing problems amongst profit centre's. 3) INVESTMENT CENTRE: *Responsibility centers whose managers and employees control revenues, costs, and the level of investment. *It is also like an independent business (common when an organization acquires another organization – e.g:Sears financial centers).Investment centre is two types: 1)return on investment/capital employed 2) economic value added 1) Return on investment/capital employed : return on capital employed establishes the relationship b/w profit and capital employed .the term capital employed refers to the total investment made in the investment centre /business. however ,net capital employed comprises the total assets used less its current liabilities. : Investment centre is two types: 1)return on investment/capital employed 2) economic value added 1) Return on investment/capital employed : return on capital employed establishes the relationship b/w profit and capital employed .the term capital employed refers to the total investment made in the investment centre /business. however ,net capital employed comprises the total assets used less its current liabilities. ROI / Capital employed = Net profit ------------------- *100 Capital employed 2) Economic value added/residual income approach: EVA has been considered as a better measure of divisional performance as compared to the return on assets (ROA) and ROI. : ROI / Capital employed = Net profit ------------------- *100 Capital employed 2) Economic value added/residual income approach: EVA has been considered as a better measure of divisional performance as compared to the return on assets (ROA) and ROI. TRANSFER PRICES A transfer price is a price used to measure the price of good or service furnished by a profit centre to other responsibility centre's within a company. TYPES OF TRANSFER PRICES: 1) COST PRICE 2) COST PLUS 3) Shared profit relative to the cost 4)Market price 5) Standard price : TRANSFER PRICES A transfer price is a price used to measure the price of good or service furnished by a profit centre to other responsibility centre's within a company. TYPES OF TRANSFER PRICES: 1) COST PRICE 2) COST PLUS 3) Shared profit relative to the cost 4)Market price 5) Standard priceADVANTAGE OF RESPONSIBILTY ACCOUNTING: 1) assigning of responsibility 2) Improves performance 3) Helpful in cost planning 4) Delegation and control 4)Helpful in decision making : ADVANTAGE OF RESPONSIBILTY ACCOUNTING : 1) assigning of responsibility 2) Improves performance 3) Helpful in cost planning 4) Delegation and control 4)Helpful in decision making