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10: Responsibility Accounting for Cost, Profit and Investment Centers

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    65762
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    • 10.1: Capital Investment Analysis
      This page emphasizes the importance of capital budgeting for selecting profitable projects aligned with company goals, highlighting the risks of poor decisions. It distinguishes between sunk costs and out-of-pocket costs, critical for decision-making. Key components include evaluating cash flows, considering the time value of money, and understanding the cost of capital. Accurate analysis is essential due to limited investment funds and the long-term impact of expenditures.
    • 10.2: Chapter 9 Study Plan (update)
      This page presents a study plan centered on performance measurement, detailing knowledge and skills related to decentralized units such as profit centers and cost centers. It includes key metrics and focuses on reasoning skills for differentiating center types and understanding efficiency. Skill targets involve calculating financial metrics like ROI and creating balanced scorecards. The plan aims to provide the tools and knowledge needed for effective performance analysis and measurement.
    • 10.3: Short Term Business Decisions
      This page discusses project selection methods, specifically the payback period and unadjusted rate of return, emphasizing their focus on quick returns while neglecting long-term profitability and the time value of money. Additionally, it highlights a common assumption in capital budgeting that all net cash inflows occur at year-end for simplified present value calculations, referencing various contributors to financial education resources.
    • 10.4: Accounting in the Headlines – Payback
      This page outlines the comparison between renting and buying a cable modem from Time Warner Cable. Renting costs $5.99 monthly, while purchasing a Motorola Surfboard SB6121 modem requires a one-time payment of $79.99. The payback period for buying is analyzed against rental costs. Renting offers convenience with no upfront cost, while buying provides long-term savings and ownership benefits. The content includes questions about the payback period and the pros and cons of each option.
    • 10.5: The Capitol Rationing Process
      This page discusses the significance of working capital investments in capital projects. It highlights a case where a $50,000 machinery investment combined with a $40,000 working capital investment produced annual cash inflows of $14,500. Despite the income, the overall net present value was negative at $(8,715) due to the tied-up working capital, underscoring the need to account for working capital in capital-budgeting decisions.
    • 10.6: Controlling Capital Investment Expenditures
      This page discusses the importance of preparing a capital expenditures budget early in the budget process, before creating cash budgets, income statements, or balance sheets. This budget is vital for deciding the financing of capital projects, which influences depreciation calculations and cash payment allocations in subsequent budgeting steps.
    • 10.7: Chapter 9 Key Points
      This page discusses how managers should be assessed on controllable costs, distinguishing between direct and indirect costs. It explains how indirect costs are allocated and the contribution of segments to indirect expenses. Additionally, it covers calculations for Return on Investment (ROI) and Residual Income, linking them to investment performance relative to minimum requirements and capital costs.
    • 10.8: Glossary
      This page is a glossary of essential financial and managerial accounting terms, detailing concepts like budget variance, contribution margin, and cost objects. It discusses responsibility centers (profit and investment centers), accounting methods (management by exception, responsibility accounting), and financial metrics (ROI, residual income, transfer pricing). The focus is on the analysis and tracking of revenues, expenses, and asset values within organizational segments.
    • 10.9: Chapter 9- Exercises
      This page discusses responsibility accounting, detailing principles, responsibility centers, transfer pricing, and performance evaluation methods. It features exercises on responsibility reports, ROI calculations, and segment performance. The text also addresses business challenges related to expense allocation and contribution margins, while examining the impact of financial decisions on profitability and managerial insights.


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