Albrecht 19.pdf - Marriott School

76154_23_ch19_p942-1006.qxd 3/1/07 3:35 PM Page 948
948 Part 6 Control in a Management Accounting System
EXHIBIT 2
Responsibility Accounting Reports for Edison Automobile
Company of IMC (in thousands of dollars)
Budgeted Actual
President, Edison Automobile Responsibility Centers Costs Costs Variance*
The president receives from each General Administration . . . . . . . . . $ 89,000 $ 81,000 $ 8,000 F
geographic area of operations a report United States . . . . . . . . . . . . . . . . 145,000 151,000 6,000 U
summarizing its performance. The Far East . . . . . . . . . . . . . . . . . . . . 58,000 65,000 7,000 U
president can see where further Europe . . . . . . . . . . . . . . . . . . . . . 111,000 99,000 12,000 F
investigation needs to be done by Total costs . . . . . . . . . . . . . . . . . $403,000 $396,000 $ 7,000 F
tracing the differences between budget
and actual downward to their sources.
Budgeted Actual
Far East Operations Responsibility Centers Costs Costs Variance
The manager of Far East operations Japan Operations . . . . . . . . . . . . . $ 21,000 $ 23,000 $ 2,000 U
receives a report from each country Korea Operations . . . . . . . . . . . . . 18,000 17,000 1,000 F
segment’s head. These reports are China Operations . . . . . . . . . . . . . 11,000 13,000 2,000 U
then summarized and passed on to the Thailand Operations . . . . . . . . . . . 8,000 12,000 4,000 U
president of Edison Automobile.
Total costs . . . . . . . . . . . . . . . . . $ 58,000 $ 65,000 $ 7,000 U
Budgeted Actual
Japan Operations Responsibility Centers Costs Costs Variance
The manager of Japan operations Sales . . . . . . . . . . . . . . . . . . . . . . $ 2,800 $ 1,700 $ 1,100 F
receives from each unit a report Manufacturing . . . . . . . . . . . . . . . . 9,000 10,200 1,200 U
summarizing its performance. These Service . . . . . . . . . . . . . . . . . . . . . 5,800 6,500 700 U
reports are combined and sent up to Administration . . . . . . . . . . . . . . . . 3,400 4,600 1,200 U
the next level, the manager of Total costs . . . . . . . . . . . . . . . . . $ 21,000 $ 23,000 $ 2,000 U
Far East operations.
Variable Costs Budgeted Actual
Japan Manufacturing Division of Manufacturing Costs Costs Variance
The Manufacturing division supervisor Direct materials . . . . . . . . . . . . . . . $ 2,000 $ 2,500 $ 500 U
receives a performance report on the Direct labor . . . . . . . . . . . . . . . . . . 6,000 6,400 400 U
supervisor’s center of responsibility. Manufacturing overhead . . . . . . . . 1,000 1,300 300 U
The totals from these reports are then Total costs . . . . . . . . . . . . . . . . . $ 9,000 $ 10,200 $ 1,200 U
communicated to the manager of
Japan operations, the next level
of responsibility.
*U means unfavorable.
responsibility center
An organizational unit in
which a manager has
control over and is held
accountable for
performance.
cost center
An organizational unit in
which a manager has
control over and is held
accountable for cost
performance.
Responsibility Centers In our example, the president of IMC is responsible
for the entire organization and should be held accountable for the company’s
overall successes and failures. At lower levels, the president of Edison Automobile
Company, the manager of Edison’s operations in the Far East, the manager in
charge of Japan operations in Edison’s Far East operations, and the manager of the
Japan Manufacturing division, for example, would be held responsible for operations
within their respective units.
Each unit is referred to as a responsibility center, and, depending on the
operation, it may be a cost, profit, or investment center. As the name implies,
a cost center is any organizational unit in which the manager of that unit has
control only over the costs incurred. The manager of a cost center has no responsibility
for revenues or assets, either because revenues are not generated in