Return on Investment / Michael Paul Licata.

Format:

Book

Author/Creator:

Licata, Michael Paul, author.

Series:

SAGE skills: Business.

SAGE skills: Business

Language:

English

Subjects (All):

Rate of return.

Physical Description:

1 online resource.

Place of Publication:

Los Angeles, CA : SAGE Publications, Inc., 2024.

Summary:

Let's talk about responsibility accounting! Traditionally, business organizations have been divided into functional divisions or segments. A segment is defined as a fairly autonomous unit of a company defined according to function or product line. Segments can be departments organized to perform specific functions such as marketing, production, finance, purchasing, and shipping. Therefore, a responsibility center is a department or segment or division of an organization for which a particular manager or executive is responsible. Another way to define a responsibility center is as a unit of a firm where an individual manager is held accountable for the performance or specified financial results under their control. There are commonly four types of responsibility centers: revenue centers, cost centers, profit centers, and investment centers. Responsibility accounting attempts to structure performance reports that emphasize the factors that the managers of these responsibility centers control. Remember that these responsibility centers or subunits can be: Departments of an organization (College of Business: finance department, accounting department, economics department, management department) Divisions of a company (Dell Computers: marketing, finance, production, sales, research and development, and human resources) Product lines of a company (Starbucks: coffee, tea, and snacks) Responsibility accounting also focuses on reporting the performance of each segment. For example, a company could have an income statement for each product line in its business. A 7-Eleven convenience stores could also have an income statement for each individual 7-Eleven store. When you have a reporting setup like that, it's easier to see how an individual store manager is performing and offer feedback on how they can improve their performance. Let's think about some of the advantages to a business that come from viewing its aggregate business as divided into smaller, more manageable subunits or responsibility centers: It makes it clear to management exactly how the company is structured and emphasizes who is accountable for each responsibility center's performance and navigating its challenges or problems. It enhances the attention and awareness of managers required to explain the variations in performance of their respective segments. It helps management focus on performance by comparing preplanned performance targets and actual results for each segment. It incentivizes individual employees as they know that their work and achievements will be reviewed by upper-level management. It helps management plan and structure future expenditures and revenue of that segment. It motivates cost control among workers because they will understand which costs their segment will be held responsible for. It helps clarify and communicate individual segment goals and overall company goals to everyone in the company. It simplifies a company's financial reporting responsibilities by introducing a structure where each individual segment or subunit must prepare its own segment performance reports on a timely basis. As an employee of any type of business, you can ask yourself: What types of responsibility centers is my business divided into, and which responsibility center do I work in? How is performance measured in my responsibility center? How am I performing as compared to other employees in my responsibility center? Are the costs that are being measured in my responsibility center costs that I can control? If my performance is being judged on costs that I cannot control, then my performance evaluation from management may not be fair. Consider this example: If you are a salesperson for a pharmaceutical company, your responsibility center may be a sales territory, and your performance may be measured based on the sales total you generate in the current year versus that of the previous year or by comparing the sales dollars you generate in the current year versus the sales dollars in the current year of other salespeople in your company with similar-size sales territories. As a salesperson, are you being evaluated on any additional basis besides sales dollars generated? Are you being evaluated on costs you incur such as traveling expenses (airfare, hotels, meals), and are these costs controllable by you? Establishing responsibility centers within an organization can hold managers of subunits within the organization responsible for the assets, revenues, and costs they control. The level of control a manager has over a segment's assets, revenues, and costs will help determine the type of responsibility center used for each manager. Organizations using responsibility centers can assign managers of subunits, such as product lines or departments, specific and measurable performance goals that can be used to hold these managers accountable for their performance. With responsibility centers, every employee knows what is expected.

Notes:

Description based on publisher supplied metadata and other sources.

ISBN:

1-0719-6420-8

9781071964200

OCLC:

1456886231