chap013-管理成本會(huì)計(jì)-CGA-MA1-Managerial-Accounting-ma

1、chap013_管理本錢會(huì)計(jì)_CGA_MA1_Managerial_Accounting management_accounting_課件Segment Reporting, Decentralization, and the Balanced Scorecard Chapter 13Decentralization in Organizations Benefits ofDecentralization Top management freed to concentrate on strategy.Lower-level managers gain experience in decisio

2、n-making.Decision-making authority leads to job satisfaction.Lower-level decisions often based onbetter information.Lower level managers can respond quickly to customers. Decentralization in OrganizationsDisadvantages of DecentralizationLower-level managers may make decisions without seeing the “big

3、 picture.May be a lack ofcoordination among autonomous managers.Lower- level managersobjectives may not be those of the organization.May be difficult to spread innovative ideas in the organization.Cost, Profit, and Investments Centers ResponsibilityCenter Cost Center Profit Center Investment Center

4、Cost, profit,and investment centers are all known as responsibility centers.Cost CenterA segment whosemanagerhas controlover costs,butnot over revenues or investment funds.Profit CenterAsegment whose manager has controloverbothcostsand revenues, but no control over investment funds.RevenuesSales Int

5、erest Other Costs Mfg. costsCommissions Salaries OtherInvestment CenterA segment whose manager has control over costs, revenues, and investments in operating assets.Corporate Headquarters Responsibility CentersCost Centers Investment CentersSuperior Foods Corporation provides an example of the vario

6、us kinds of responsibility centers that exist in an organization.Responsibility CentersSuperior Foods Corporation provides an example of the various kinds of responsibility centers that exist in an organization.Profit Centers Responsibility Centers Cost CentersSuperior Foods Corporation provides an

7、example of the various kinds of responsibility centers that exist in an organization.Learning Objective 1Prepare a segmented income statement using the contribution format, and explain the difference between traceable fixed costs and common fixed costs.Decentralization and Segment ReportingA segment

8、 is any part or activity of an organization about which a manager seeks cost, revenue, or profit data.Popular FoodsAn Individual Store A Sales TerritoryA Service CenterSuperior Foods: Geographic RegionsSuperior Foods Corporation could segment its business by geographicregion.Superior Foods: Customer

9、 ChannelSuperior Foods Corporation could segment its business by customer channel.Keys to Segmented Income StatementsThere are two keys to building segmented income statements:A contributionformatshouldbe used because itseparatesfixedfrom variable costs and it enables the calculation of a contributi

10、on margin.Traceablefixedcostsshouldbe separatedfrom commonfixedcoststo enable the calculation of a segment margin.Identifying Traceable Fixed CostsTraceable costs arise because of the existence of a particularsegment and would disappearovertimeifthe segment itselfdisappeared.No computer division mea

11、ns . . . No computer division manager.Identifying Common Fixed CostsCommon costs arise because of the overall operationof the companyand would not disappearifany particularsegment were eliminated.No computer division but . . .We still have a company president.Traceable Costs Can BecomeCommon CostsIt

12、 is important to realize that the traceable fixed costs of one segment may be a common fixed cost of another segment.For example, the landing fee paid to land an airplane at an airportistraceabletotheparticularflight,butitisnottraceableto first-class, business-class, and economy-class passengers.Seg

13、ment MarginThe segment margin, which is computed by subtracting the traceablefixed costs of a segment from itscontribution margin, isthe best gauge of the long-run profitability of a segment.Time ProfitsTraceable and Common Costs FixedCosts Traceable Common Dont allocatecommon costs to segments.Acti

14、vity-Based CostingActivity-basedcostingcan help identifyhow costs shared by more than one segment are traceable to individual segments.Assumethatthreeproducts,9-inch,12-inch,and 18-inchpipe,share 10,000 square feet of warehousing space, which is leased at a price of$4 per square foot.If the 9-inch,

15、12-inch, and 18-inch pipes occupy 1,000, 4,000, and5,000squarefeet,respectively,thenABC canbeusedtotracethe warehousing costs to the three products as shown.Levels of Segmented Statements Webber, Inc. has two divisions.Levels of Segmented StatementsOur approach to segment reporting uses the contribu

16、tion format.Cost of goods sold consists ofvariablemanufacturing costs.Fixed andvariable costs are listed in separate sections.Levels of Segmented Statements Segment marginis Televisionscontribution to profits.Contribution marginis computed by taking sales minus variable costs.Our approach to segment

17、 reporting uses the contribution format. Levels of Segmented StatementsLevels of Segmented StatementsCommon costs should not be allocated to the divisions. These costs would remain even if one of the divisions were eliminated.Traceable Costs Can Become Common CostsAs previouslymentioned,fixedcoststh

18、atare traceableto one segment can become common if the company is divided into smaller segments.Let s see how this works using the Webber, Inc. example!Traceable Costs Can Become Common CostsProduct Lines Regular Big Screen Television DivisionWebbers Television DivisionTraceable Costs Can Become Com

19、mon CostsWe obtained the following information from the Regular and Big Screen segments.Traceable Costs Can Become Common CostsFixed costs directly traced to the Television Division$80,000 + $10,000 = $90,000External ReportsThe International Financial Reporting Standards (IFRS) and US GAAP require c

20、ompanies to include segmented financial data in their annual reports.In addition to some compulsory disclosure, companies must report segmented results to shareholders using the same measures to be used by the Chief Operating Decision Maker (CODM) to make decisionsSince the contributionapproach tose

21、gment reportingdoes notcomply withfinancialreportingstandards,itislikelythatsome managers will choosetoconstructtheirsegmentedfinancialstatementsusingthe absorption approach to comply with GAAP.Omission of CostsCosts assignedtoa segment shouldincludeallcostsattributableto that segment from the compa

22、nys entire value chain.ProductCustomerR&DDesignManufacturingMarketingDistribution ServiceBusiness Functions Making Up The Value ChainInappropriate Methods of Allocating Costs Among Segments Segment1Segment 3Segment 4Inappropriate allocation base Segment2Failure to trace costs directlyCommon Costs an

23、d SegmentsSegment 1Segment 3Segment 4Segment 2Common costs should not be arbitrarily allocated to segments basedon the rationale that“someone has to cover the common costs for two reasons:This practice may make a profitable business segment appear to be unprofitable.Allocatingcommonfixedcostsforcesm

24、anagers tobe heldaccountable for costs they cannot control.Quick Check ?AssumethatHoaglands Lakeshore prepareditssegmented income statement as shown.Quick Check ?How much of the common fixed cost of $200,000 can be avoided by eliminating the bar?None of it.Some of it.All of it.Quick Check ?How much

25、of the common fixed cost of $200,000 can be avoided by eliminating the bar?None of it.Some of it.All of it.A common fixed cost cannot be eliminated by dropping one of the segments.Quick Check ?Suppose square feetisused as the basisforallocatingthecommon fixedcostof$200,000.Howmuch would be allocated

26、tothebar ifthebar occupies 1,000 square feet and the restaurant 9,000 square feet?a. $20,000b. $30,000c. $40,000d. $50,000Suppose square feetisused as the basisforallocatingthecommon fixedcostof$200,000.Howmuch would be allocatedtothebar ifthebar occupies 1,000 square feet and the restaurant 9,000 s

27、quare feet?a. $20,000b. $30,000c. $40,000d. $50,000Quick Check ?The bar would be allocated 1/10 of the cost or $20,000. Quick Check ?If Hoaglands allocates its common costs to the bar and the restaurant, what would be the reported profit of each segment?Allocations of Common Costs Hurray, now everyt

28、hing adds up! Quick Check ?Should the bar be eliminated?YesNoShould the bar be eliminated?YesNoQuick Check ?The profit was $44,000 before eliminating the bar. If we eliminatethe bar, profit drops to $30,000!Learning Objective 2Compute return on investment (ROI) and show how changes in sales, expense

29、s, and assets affect ROI.Return on Investment (ROI) Formula ROI =Net operating income Average operating assetsCash, accounts receivable, inventory, plant and equipment, and other productive assets.Income before interestand taxes (EBIT)Net Book Value vs. Gross CostMostcompaniesusethenetbookvalueofdep

30、reciableassetsto calculate average operating assets.Understanding ROI ROI =Net operating income Average operating assets Margin =Net operating income SalesTurnover = SalesAverage operating assets ROI =Margin ? Turnover Increasing ROIThere are three ways to increase ROI . . . IncreaseSales Reduce Exp

31、enses Reduce AssetsIncreasing ROI An ExampleRegal Company reports the following: Net operating income$30,000 Average operating assets$ 200,000 Sales$ 500,000Operating expenses$ 470,000 ROI =Margin ? Turnover Net operating incomeSales SalesAverage operating assetsROI =What is Regal Company s ROI? Inc

32、reasing ROI An Example$30,000$500,000$500,000$200,000ROI =6% ? 2.5 = 15% ROI =ROI =Margin ? Turnover Net operating incomeSalesSalesAverage operating assetsROI =Investing in Operating Assets to Increase SalesAssume thatRegalsmanager investsina$30,000pieceof equipment that increases sales by $35,000,

33、while increasing operatingexpenses by $15,000.Let s calculate the new ROI. Regal Company reports the following:Net operating income$50,000 Average operating assets$ 230,000 Sales$ 535,000Operating expenses$ 485,000 Investing in Operating Assets to Increase Sales$50,000$535,000$535,000$230,000ROI =9.

34、35% ? 2.33 = 21.8% ROI =ROI increased from 15% to 21.8%.ROI =Margin ? Turnover Net operating incomeSales SalesAverage operating assetsROI =Criticisms of ROIIn the absence of the balanced scorecard, management maynot know how to increase ROI. Managers often inherit many committed costs over which the

35、y have no control.Managers evaluated on ROI may reject profitable investment opportunities.Learning Objective 3Computeresidualincome and understanditsstrengthsand weaknesses. Residual Income - Another Measure of PerformanceNet operating income above some minimum return on operating assetsCalculating

36、 Residual Income ()This computation differs from ROI.ROI measures net operating income earned relative to the investment in average operating assets.Residualincome measures net operatingincome earned lessthe minimum required return on average operating assets.Residual Income An ExampleThe Retail Div

37、ision of Zephyr, Inc. has average operating assets of$100,000 and is required to earn a return of 20% on these assets.In the current period, the division earns $30,000. Let s calculate residual income.Residual Income An ExampleMotivation and Residual IncomeResidual income encourages managers to make

38、 profitable investments that wouldbe rejected by managers using ROI. Quick Check ?RedmondAwnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the divisions ROI?a. 25%b.5%c. 15

39、%d. 20%Quick Check ?RedmondAwnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the divisions ROI?a. 25%b.5%c. 15%d. 20%ROI = NOI/Average operating assets= $60,000/$300,000 =

40、20%Quick Check ?RedmondAwnings,a divisionofWrap-up Corp.,has a netoperating income of $60,000 and average operatingassetsof $300,000.Ifthe manager of the division is evaluated based on ROI, will she want to make aninvestmentof$100,000thatwouldgenerateadditionalnetoperating income of $18,000 per year

41、?YesNoQuick Check ?RedmondAwnings,a divisionofWrap-up Corp.,has a netoperating income of $60,000 and average operatingassetsof $300,000.Ifthe manager of the division is evaluated based on ROI, will she want to make aninvestmentof$100,000thatwouldgenerateadditionalnetoperating income of $18,000 per y

42、ear?YesNoROI = $78,000/$400,000 = 19.5%This lowers the divisions ROI from 20.0% down to 19.5%. Quick Check ?The companys requ ired rate of return is 15%. Would the company want the manager of the Redmond Awnings division to make an investmentof $100,000 thatwould generateadditionalnet operatingincom

43、e of $18,000 per year?YesNoQuick Check ?The companys requiredrate of return is 15%. Would the company want the manager of the Redmond Awnings division to make an investmentof $100,000 thatwould generateadditionalnet operatingincome of $18,000 per year?YesNoROI = $18,000/$100,000 = 18%The return on t

44、he investment exceeds the minimum required rate of return.Quick Check ?RedmondAwnings,a divisionofWrap-up Corp.,has a netoperatingincome of $60,000and average operatingrate of return for the company is 15%. Wha income?assetsof$300,000.t is the divisionThe requireds residuala. $240,000b. $45,000c. $1

45、5,000d. $51,000Quick Check ?RedmondAwnings,a divisionofWrap-up Corp.,has a netoperating income of $60,000and average operatingassetsof$300,000.The required rate of return for the company is 15%. What is the divisions residual income?a. $240,000b. $45,000c. $15,000d. $51,000Net operating income$60,00

46、0 Required return (15% of $300,000)(45,000) Residual income$15,000 Quick Check ?Ifthe manager oftheRedmondAwnings divisionisevaluatedbased on residual income, willshe want tomake an investment of $100,000 that would generate additional net operating income of $18,000 per year?YesNoQuick Check ?Ifthe

47、 manager oftheRedmondAwnings divisionisevaluatedbased on residual income, willshe want tomake an investment of $100,000 that would generate additional net operating income of $18,000 per year?YesNoNet operating income$78,000Required return (15% of $400,000)(60,000)Residual income$18,000Yields an inc

48、rease of $3,000 in the residual income. Divisional Comparisons and Residual IncomeThe residual income approach has one major disadvantage.Itcannotbeusedtocomparetheperformanceofdivisionsof different sizes.Zephyr, Inc. - ContinuedRecall the following information for the Retail Division of Zephyr,Inc.

49、Assumethe followinginformationforthe Wholesale DivisionofZephyr,Inc.Zephyr, Inc. - ContinuedThe residualincomenumbers suggestthattheWholesaleDivision outperformed the Retail Division because its residual income is $10,000higher. However, the Retail Division earned an ROI of 30% compared toan ROI of

50、22% for the Wholesale Division. The Wholesale Divisions residual income is larger than the Retail Division simply because it isa bigger division.Learning Objective 4Understand how to construct and use a balanced scorecard. The Balanced ScorecardManagement translates its strategy into performance mea

51、sures that employees understand and influence.Performance measures CustomersLearning and growth Internal business processes FinancialThe Balanced Scorecard:FromStrategy to Performance Measures FinancialHas our financial performance improved? CustomerDo customers recognize that we are delivering more

52、 value? Internal Business ProcessesHave we improved key business processes so that we can deliver more value to customers?Learning and GrowthAre we maintaining our ability to change and improve? Performance MeasuresWhat are our financial goals?What customers do we want to serve and how are we going

53、to win and retain them?What internal busi- ness processes are critical to providing value to customers?Vision and StrategyThe Balanced Scorecard:Non-financial MeasuresThe balanced scorecard relies on non-financial measures in addition to financial measures for two reasons:Financialmeasuresarelagindi

54、catorsthatsummarizethe resultsofpastactions.Non-financialmeasuresareleading indicators of future financial performance.Topmanagersareordinarilyresponsibleforfinancialperformance measures not lower level managers.Non-financial measures are more likely to beunderstood and controlled by lower level man

55、agers.The Balanced Scorecard for IndividualsA personal scorecard should contain measures that can be influenced by the individual being evaluated and that support the measures in the overall balanced scorecard.The entire organization should have an overall balanced scorecard. Each individual should

56、have a personal balanced scorecard.The balanced scorecard lays out concrete actions to attain desired outcomes.A balanced scorecard should have measures that are linked togetheron a cause-and-effect basis.If we improve one performance measure . . . Another desired performance measure will improve. T

57、he Balanced ScorecardThenThe Balanced Scorecard and CompensationIncentivecompensationshouldbelinkedtobalancedscorecard performance measures.Employee skills in installing options Number of options availableTime to install optionCustomer satisfaction with options Number of cars soldContribution per ca

58、r ProfitLearning and Growth Internal Business Processes CustomerFinancialThe Balanced Scorecard Jaguar Example Employee skills in installing optionsNumber of options available Time to install optionCustomer satisfaction with options Number of cars soldContribution per car ProfitIncrease Options Time

59、 Decreases Strategies Satisfaction Increases IncreaseSkills ResultsThe Balanced Scorecard Jaguar ExampleEmployee skills in installing options Number of options availableTime to install optionCustomer satisfaction with optionsNumber of cars sold Contribution per car ProfitSatisfaction Increases Resul

60、tsCars sold IncreaseThe Balanced Scorecard Jaguar Example Employee skills in installing optionsNumber of options available Time to install optionCustomer satisfaction with options Number of cars soldContribution per car ProfitResultsTime Decreases Contribution Increases Satisfaction IncreasesThe Bal