Module Case Assignment: RESPONSIBILITY ACCOUNTING FOR COST, PROFIT AND INVESTMENT CENTERS
Overview
Review the three components in the background material to answer the questions and make computations relating to responsibility accounting.
Case Assignment
Short-Answer Questions
1. What is the fundamental principle of responsibility accounting?
2. List five important factors that should be considered in designing reports for a responsibility accounting system.
3. How soon should accounting reports be prepared after the end of the performance measurement period? Explain.
4. Name and describe three types of responsibility centers and list their main characteristics.
5. Give five real-world examples of at least two of the types of responsibility centers.
6. Many organizations limit the number of expense (cost) centers.
a. List three reasons for wanting to limit cost centers.
b. List three ideas for eliminating or reducing the size of an existing cost center.
7. What is the connection between the extent of decentralization and the investment center concept?
8. Give some of the advantages of decentralization.
9. Differentiate between a direct cost and an indirect cost of a segment. What happens to these categories if the segments to which they are related are eliminated?
Part II
Real-World Example
Review the background material and do some research to learn about organizations using responsibility centers as part of an organizational structure. Information can be found in the news, research papers, and on investment sites. Another option is to locate the financial statements for a company, make some assumptions, and prepare your own assessment of the organizational structure. Describe the situation and the results. Show computations when appropriate.
Assignment Expectations
Part I
Write 3-5 sentences for each question. Use Word and make a separate submission for this part.
Part II
Write an essay (300-500 words).
Show sources when appropriate. APA format is suggested, but not required.
Module SLP: RESPONSIBILITY ACCOUNTING FOR COST, PROFIT AND INVESTMENT CENTERS
The following data pertain to the operating revenues and expenses for California, Inc. for 20XX.
|
Los Angeles (LA) Segment
|
San Francisco (SF) Segment
|
Total
|
|
Sales
|
$180,000
|
$360,000
|
$540,000
|
|
Variable expenses
|
96,000
|
240,000
|
336,000
|
|
Direct fixed expenses
|
24,000
|
30,000
|
54,000
|
|
Indirect fixed expenses
|
|
|
72,000
|
Assets (investment) used to generate operating income for the two segments are shown below.
|
Los Angeles Segment
|
San Francisco Segment
|
|
Assets directly used by and identified with the segment
|
$180,000
|
$360,000
|
a. Prepare a segmented income statement in good format showing the contribution margin of each segment, the contribution to indirect expenses of each segment, and the total income of California, Inc.
b. Determine the return on investment for evaluating (1) the earning power of the entire company and (2) the performance of each segment.
c. Comment on the results of part (b).
SLP Assignment Expectations
Show computations in good format and explain answers as required. Excel is a great tool to make computations and present financial information in an easy to understand format. Write comments below the computations in Excel. Submit only the Excel file. Both content and the clarity of the presentation will be evaluated for grading purposes.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.