Professional Documents
Culture Documents
Fundamentals of Management
Control Systems
McGraw-Hill/Irwin
12 - 2
Decentralized Organizations
12 - 3
LO
2
Advantages of Decentralization
Better use of local knowledge
Faster response
Wiser use of top managements time
Reduction of problems to more manageable size
Training, evaluation, and motivation of local managers
12 - 4
LO
2
Disadvantages of Decentralization
Dysfunctional decision making:
Local managers can make decisions in their interest,
which can differ from those of the organization.
Duplication of administration:
Local managers make the same types of decisions
made at headquarters.
12 - 5
12 - 6
LO
3
Elements of a Management
Control System
12 - 7
Responsibility Accounting
L.O. 4 Explain the relation between organization
structure and responsibility centers.
Cost
centers
Revenue
centers
Profit
centers
Investment
centers
12 - 8
Evaluating Performance
L.O. 5 Understand how managers evaluate performance.
Controllability concept:
Managers should be held responsible
for costs or profits over which they have
decision-making authority.
Relative performance evaluation (RPE):
Compares divisional performance with that
of peer group divisions
12 - 9
LO
6
Actual
$70,000
51,800
Target
$70,000
51,800
My revenue
and costs
were on target.
12 - 11
LO
6
I'm not
responsible for
corporate
revenue.
12 - 12
LO
6
I'm not
responsible for
corporate
costs.
12 - 13
LO
6
12 - 14
Performance Evaluation
Systems Incentives
L.O. 7 Understand the potential link between incentives
and illegal or unethical behavior.
12 - 15
Internal Controls
L.O. 8 Understand how internal controls can help protect assets.
Internal control is a process designed to provide
reasonable assurance that an organization will
achieve its objectives in the following categories:
Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations
12 - 16
End of Chapter 12
McGraw-Hill/Irwin