Term
| Decentralized Organizations |
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Definition
| does not confine decision-making authority to a few top executives; rather, decision making authority is spread throughout the organization. |
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Term
| Responsibility Act System |
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Definition
| links lower-level managers decision making authority with accountability fot the outcomes of those decision. |
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Term
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Definition
| any part of an organization whose manager has control over, and is accountable for cost, profit, or investments. |
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Definition
| Manager has control over cost, but not revenue or investment |
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Definition
| manager has control of costs and revenue |
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Definition
| Manager controls cost, revenue, and investment |
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Term
| Return on Investment (ROI) |
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Definition
| net operating income / average operating assets |
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Definition
| cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes. |
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Definition
| net operating income that an investment center earns above the minimum required return on its assets. Encourages managers to make investments that are profitable for the entire company but would be rejected by managers using the ROI approach. |
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Definition
| elapsed time from when a customer order is received to when the completed order is shipped |
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Definition
| turning raw materials into completed products. process time, inspection time, move time, and queue time. Process time is the only value added activity. |
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Term
| Manufacturing Cycle Efficiency (MCE) |
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Definition
| value added time / throughput time |
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Term
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Definition
| consistes of an integrated set of performance measures that are derived from and support a company's strategy. measures included are unique to each company. Broken into four groups: financial, customer, internal business process, and learning and growth. It stresses learning so that business practices improve and help financial growth. |
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Term
| Balanced Scorecard: Relying on Non-Financial Measures |
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Definition
1. Financial measures are lag indicators that summarize the results of past actions. Non-Financial measures are leading indicators of future financial performance
2. Top managers are ordinarily responsible for financial performance measures, not lower level managers. non-financial measures are more likely to be understood and controlled by lower level managers. |
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Term
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Definition
| the price charged when one segment of a company provides goods or services to another segment of the company. Have no direct effect on the entire company's reported profit, but can have a dramatic effect on the reported profitability of a division. Best interests of company |
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Term
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Definition
| occurs when managers do not act in the best interest of the over all company or even their own divisions |
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Term
| Negotiated Transfer Price |
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Definition
1. Preserves the anatomy of the divisions, which is consistent with the spirit of decentralization.
2. The manager has greater knowledge of the transfer price and potential costs and benefits. |
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Definition
| determined by the selling division |
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Definition
| determined by the buying division |
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Term
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Definition
| the price charged for a product on the open market. This is often regarded as the best approach to the transfer pricing problem |
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