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MCS Ch. 4
n/a
21
Accounting
Graduate
03/10/2011

Additional Accounting Flashcards

 


 

Cards

Term
Responsibility centers
Definition
organization unit that is headed by a manager who is responsibility for its activities
Term
Efficiency
Definition
ratio of outputs to inputs, Ex. X is more efficient than Y, not X is 80% effecient.
Term
Efficiency
Efficient if (2)
Flaws (2)
Definition
Efficient if
1. uses < resources, products same output
2. uses same resources, greater output

Flaws:
1. Recorded costs are not precise measures of resources consumed
2. Std is only an approximation
Term
Effectiveness
Definition
relationship between a responsibility center's output and its objectives. Efficient if it does things right and effective if it does the right things.
Term
Types of responsibility centers (4)
Definition
1. Revenue
2. Expense
3. Profit
4. Investment
Term
Revenue
Definition
output (revenue) measured in monetary terms, no formal attempt to related revenue to expenses. Actual sales are measured against budgets.
Term
Expense
2 types of expense centers
Definition
inputs are measured in monetary terms, outputs are not. 2 types of costs
1. Engineered: right amount can be estimated with reasonably reliability.
2. Discretionary: no estimate, depends on mgmt judgment.
Term
Engineered expense centers (3)
Definition
1. Input can be measured in monetary terms
2. output can be measured in physical terms
3. optimum $ amt of input required ot produce one unit of output can be determined.
Term
Discretionary expense centers
Definition
administrative and support units. outputs cannot be measured in monetary terms.
Most difficult to measure: R&D, marketing, then admin.
Term
Marketing (2 types)
Definition
Order getting - advertising
Order filling - logistics.
Adv. - discretionary
Log. - engineered
Term
Profit center
Definition
measures both revenues and costs
Term
Investment center
Definition
matches revenues and costs against assets
Term
Planning function
Incremental budgeting
Definition
Current level of expenses is sued as a starting point, then adjusted for inflation, etc.
2 drawbacks
1. current expenditures are not re-examined, just accepted
2. Mgrs tend to want more $, and request additional resources, OH tends to increase.
Term
Planning function
Zero-based review
Definition
thorough analysis on a rolling schedule, every 5 years. Start from scratch.
Drawbacks:
1. time consuming
2. overwhelming for mgs involved
Term
Types of financial control (2)
Definition
1. Engineered - become cost competitive and set a std cost. Efficiency
2. Discretionary: allow mgr to participate and use judgment to control costs. Financial control is exercised at the planning stage, before costs are incurred.
Term
Admin and support center control problems (2)
Definition
1. difficulty measuring output
2. lack of goal congruence. Empire building or safeguarding a position without regard to the welfare of the entire org.
Term
3 types of marking activities
Definition
1. order filling/logistics - engireered.
2. revenue generation: compare actual revenue with qties sold. budgeted with actual units.
3. order getting: true marketing costs - discretionary.
Term
Inputs (2)
Definition
1. Casual and direct: raw material becomes part of a FG. Control focuses on using the minimal input to produce the output.
2. Ambiguous: relationships between increased $ spent and outputs are rarely comparable.
Term
Zero-based reviews AKA (4)
Definition
1. Downsizing
2. Rightsizing
3. Restructuring
4. Process reengineering.
Term
Budget preparation (3)
Definition
1. Basic costs
2. Discretionary costs
3. Explain proposed increases
Term
Difficulties with R&D measurement (2)
Definition
1. Unplanned
2. Time lapse between research and product launch
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