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Lecture Managerial accounting (6th edition): Chapter 12 - Jiambalvo

Chapter 12 - Decentralization and performance evaluation. This chapter presents the following content: Decentralized organizations, advantages of decentralization, evaluating subunits, evaluating subunit managers, responsibility accounting and performance evaluation,. | 1 Slide 12-2 CHAPTER 12 Decentralization and Performance Evaluation 2 Learning objective 1: Explain the advantages and disadvantages of decentralization, explain why companies evaluate the performance of subunits and subunit managers, and identify cost centers, profit centers, and investment centers. Slide 12-3 Decentralized Organizations As firms increase in size and complexity, business segments or subunits are organized The managers of the segments are granted decision making authority so that the firm will function efficiently and effectively Firms that grant substantial decision making authority to the managers of subunits are referred to as decentralized organizations 3 Slide 12-4 Decentralized Organizations Most firms are neither totally centralized nor totally decentralized Typically, decentralization is a matter of degree A firm is more decentralized if more decision making authority is delegated to sub-unit managers Performance evaluation can be used to ensure that managers | 1 Slide 12-2 CHAPTER 12 Decentralization and Performance Evaluation 2 Learning objective 1: Explain the advantages and disadvantages of decentralization, explain why companies evaluate the performance of subunits and subunit managers, and identify cost centers, profit centers, and investment centers. Slide 12-3 Decentralized Organizations As firms increase in size and complexity, business segments or subunits are organized The managers of the segments are granted decision making authority so that the firm will function efficiently and effectively Firms that grant substantial decision making authority to the managers of subunits are referred to as decentralized organizations 3 Slide 12-4 Decentralized Organizations Most firms are neither totally centralized nor totally decentralized Typically, decentralization is a matter of degree A firm is more decentralized if more decision making authority is delegated to sub-unit managers Performance evaluation can be used to ensure that managers make decisions that are in the best interest of the entire firm Learning objective 1: Explain the advantages and disadvantages of decentralization, explain why companies evaluate the performance of subunits and subunit managers, and identify cost centers, profit centers, and investment centers. 4 Slide 12-5 Decentralized Organizations Learning objective 1: Explain the advantages and disadvantages of decentralization, explain why companies evaluate the performance of subunits and subunit managers, and identify cost centers, profit centers, and investment centers. 5 Slide 12-6 Advantages of Decentralization A primary reason is that subunit managers have better information than top management and can respond quicker to changing circumstances Other reasons include Some firms decentralize because they believe that managers are more motivated and work harder Decentralized organizations provide excellent training for future top-level executives Learning objective 1: Explain the advantages and