Term
| Benefits of decentralization |
|
Definition
1 permits timely decisions with best available information
2 Tailors managerial skills and specializations to job requirements
3 Empowers employees and increases job satisfaction
4 Trains future managers |
|
|
Term
| Costs of decentralization |
|
Definition
1 leads to decisions that emphasize local goals over global goals
2 requires costly coordination of decisions
3 triggers improper decisions because of the divergence between individual and organizational goals |
|
|
Term
|
Definition
| an organizational subunit with specified decision rights. there are three comon forms of responsibility centers |
|
|
Term
|
Definition
| exercise control over cost. objective improve efficiency by finding ways to cut costs and minimize waste |
|
|
Term
|
Definition
| their goals are to minimize costs and to maximize revenue |
|
|
Term
|
Definition
| make decisions that effect cost, revenue, and investment. mandate is to maximize the returns from invested capital |
|
|
Term
| Controllable Performance measure |
|
Definition
| reflects the consequences of the actions taken by the decision maker. |
|
|
Term
| Informativeness principle |
|
Definition
| a performance measure is informative if it provides information about a manager's effort, even if the manager does not have control over it. |
|
|
Term
| relative performance measure |
|
Definition
| comparing firms to other firms even though firm managers may have little control on how other firms do |
|
|
Term
| An Ideal performance measure |
|
Definition
1 aligns employees and organizational goals
2 yields maximum information about the decisions or actinos of the individual or organizational unit
3 easy to measure
4 easy to understand and communicate |
|
|
Term
| Cost center managers serve two roles |
|
Definition
1 achieving cost targets for given level of output in the short term
2 making continuous efficiency improvements to cut costs in the long term |
|
|
Term
|
Definition
| a process that involves comparing the effectiveness and efficiency of various activities and business processes in a firm against the best practices in the industry |
|
|
Term
|
Definition
| a philosophy of continuous improvements. |
|
|
Term
|
Definition
| cost centers which there is a clear relation between inputs and outputs |
|
|
Term
| Discretionary Cost centers |
|
Definition
| measuring outputs can be difficult. |
|
|
Term
|
Definition
often used to measure performance of profit centers
revenue - variable costs- traceable fixed cost |
|
|
Term
| Increasingly firms measure profit center managers' ability to meet... |
|
Definition
| long term goals in addition to delivering the operating profit budgeted for the current period |
|
|
Term
| An organization evaluates an investment center on... |
|
Definition
| how well it utilizes the funds made available to it. |
|
|
Term
| Three popular measures of investment centers |
|
Definition
1 return on investment
2 residual income
3 economic value added |
|
|
Term
|
Definition
measure of the profit generated per dollar of investment.
(profit)/(investment) |
|
|
Term
| An important issue in measuring divisional investment is... |
|
Definition
| how to incorporate depreciable fixed assets such as plant and equipment |
|
|
Term
| three options of dealing with depreciable fixed assets |
|
Definition
1 net book value
2 gross book value
3 replacement or current value of the asset |
|
|
Term
|
Definition
| method for decomposing ROI into smaller pieces. |
|
|
