管理会计（双语）课后习题解析：AKMY 6e ch11_SM

1、Chapter 11Financial ControlQUESTIONS11-1Financial control is the formal evaluation of some financial facet of an organization or a responsibility center to assess organization and management performance. Financial control uses financial numbers, such as costs or expenses, as broad indices of perform

2、ance or measures of the resources used by a process or organizational unit. Financial control may involve comparing actual financial numbers with targets from a standard or budget to derive variances.11-2Internal financial control is the application of financial control tools to evaluate organizatio

3、n units. The resulting information is used inside the organization and is not provided to outsiders. External financial control is the application of financial control tools by outside analysts to evaluate various aspects of organization performance.11-3Decentralization is the delegation of decision

4、-making authority from people at higher levels in the organization to front line decision makers of the organization.11-4Control refers to the systems and tools that an organization uses to motivate decentralized decision makers to pursue the organizations goals.11-5A responsibility center is an org

5、anizational unit for which a manager is held accountable. The manager is asked to run the center to achieve the objectives of the larger organization.11-6A cost center is a responsibility unit that is evaluated based on its ability to control costs relative to some standard. Revenues or investment l

6、evel are not controlled.11-7A revenue center is assigned the responsibility to achieve, within its own operating guidelines, a target level of revenues. Managers in a revenue center do not control costs or the level of investment.11-8Organizations use profit centers when profit center employees have

7、 the ability and responsibility to control significant levels of revenues and costs of the products or services they deliver.11-9An investment center is a responsibility unit that is evaluated based on its return on investment. The managers and other employees control revenues, costs, and the level

8、of investment.11-10The controllability principle requires that people should only be held accountable for results that they can control. The manager of a responsibility center should be assigned responsibility for the revenues, costs, or investments controlled by responsibility center personnel.11-1

9、1Responsibility centers participate in developing the goods and services that the organization supplies to its customers, sharing the use of many common resources in this process. In most organizations, many revenues and costs are jointly earned or incurred.11-12A segment margin is the difference be

10、tween the revenues and costs that are deemed to be directly controllable by a responsibility center. It is therefore an important summary performance measure for each responsibility center.11-13A soft number is a number that is based on conventional accounting assumptions but relies on subjective re

11、venue and cost allocation assumptions over which there can be legitimate disagreement. Because soft numbers result from subjective interpretation, they are neither right nor wrong. 11-14A transfer price is the price at which a good or service is deemed to have been transferred between two responsibi

12、lity centers within an organization. The transfer price is treated as revenue in the supplying division and as a cost in the receiving division. The transfer price is a fiction created for control purposes and does not affect external reporting.11-15The four bases for setting transfer prices are mar

13、ket, cost, negotiated, and administered.11-16Organizations earn revenues by selling goods and services to customers. When organizations use control systems that require revenue numbers for responsibility centers, the revenue earned from the sale to the final customer must be divided among the contri

14、buting responsibility centers. This process is necessary to prepare responsibility center income statements, and in turn, evaluate the centers performance.11-17Organizations use many types of resources to make goods and services. When organizations use control systems that require cost numbers for r

15、esponsibility centers, the costs of the resources that are used by two or more responsibility centers must be divided between or among those responsibility centers. This process is necessary to prepare responsibility center income statements, and in turn, evaluate the centers performance.11-18Return

16、 on investment is a measure of accounting income (typically, operating income) divided by a measure of the investment in the assets used to earn that income.11-19All other things being equal, as efficiency (the ratio of income to sales) increases (decreases), return on investment increases (decrease

17、s).11-20All other things being equal, as productivity (the ratio of sales to investment) increases (decreases), return on investment increases (decreases). 11-21Residual income is the difference between reported accounting income and the required return on the investment (economic cost of investment

18、) used to earn that income. 11-22Economic value added (EVA) is a refinement of the residual income idea. The EVA computation adjusts reported accounting income and asset levels for what many consider the biasing effects on current results of the financial accounting doctrine of conservatism. For exa

19、mple, GAAP requires the immediate expensing of research and development costs; yet, when shareholder value analysis income is computed, research and development costs are capitalized and expensed over a certain time period, such as five years. 11-23Whole Foods states, “We use EVA extensively for cap

20、ital investment decisions, including evaluating new store real estate decisions and store remodeling proposals. We only invest in projects that we believe will add long-term value to the Company. The EVA decision-making model also enhances operating decisions in stores. Our emphasis is on EVA improv

21、ement ” ( accessed January 12, 2011). As mentioned in Chapter 11, Quaker Foods & Beverages, a food manufacturer, used EVA to support its decision in June 1992 to cease trade loading, which is the food industrys practice of using promotions to obtain orders for a two- or three-month supply of food fr

22、om customers. Trade loading causes quarterly peaks in production and sales that, in turn, require huge investments in assets, including the inventory itself, warehouses, and distribution centers. 11-24Financial control alone may be an ineffective control scorecard for three reasons. First, it focuse

23、s on financial measures that do not measure the organizations other important attributes, such as product quality and customer service. Second, financial control measures the financial effect of the overall level of performance achieved on the critical success factors, and it ignores the performance

24、 achieved on the individual critical success factors. Third, financial control is usually oriented to short-term profit performance. EXERCISES11-25Decentralization creates the need to ensure that the decentralized decision makers are pursuing the organizations stated goals and are coordinated as the

25、y make their independent decisions.11-26Examples of organization units that might be responsibility centers in a university include: A school or college, a department within a school or college, maintenance, the computing center, a dormitory residence, the registrars office, a sports program, and th

26、e alumni office.11-27Examples of cost centers are: A maintenance department in a factory, a computer department in an insurance company, and a personnel office in a government. What these responsibility centers have in common is that they do not deal directly with the organizations primary customer.

27、 Therefore, they have no direct effect on revenues. They also do not control investment levels. 11-28Examples of revenue centers are: The sporting goods department in a large department store where the corporations purchasing group makes all stocking decisions, the counter department in a fast food

28、restaurant, and the sales office in an insurance company. What these responsibility centers have in common is that they all deal with customers and have little control over the major cost of the product that they are selling to the customer. They also do not control investment levels. 11-29The manag

29、er of a large department store may have little control over stock, prices, and advertising but controls many of the other facets of performance. How customers are treated and how displays are arranged will affect sales. How staffing is done and service functions performed within the store will affec

30、t its total costs. However, the main determinants of investmentbuilding costs and inventory, are likely not controllable by the manager. Therefore, it is likely that the store should be evaluated as a profit center rather than as an investment center. The maintenance department is likely to meet the

31、 conditions of a cost centerit sells nothing to outside customers and only has a vague and indeterminable effect on sales. A single department within a store is likely to be treated as a revenue center since the manager of that department is likely to have a minimal effect on the departments costs.1

32、1-30Although many people assume that a foreign subsidiary will meet the conditions to be treated as an investment center, the classification is not automatic. As with divisions within a company, the key is the discretion that the subsidiarys management has over prices, product selection, product dev

33、elopment, costs, and investment levels. 11-31Responsibility centers might include cooking operations, ordering operations, counter and customer service operations, and maintenance. All responsibility centers interact in terms of providing customers with low costs, quality, and service. 11-32The mana

34、ger of the cinema does not control the movie that is playing, the advertising that is done for the movie, the cost of the products sold at the snack bar (these would likely be purchased by a central agency, which would also make the decision about what products to sell), and the wages that are paid

35、to employees (this would likely be determined by a collective agreement between the union representing all the employees at all the cinemas and the parent company). The manager and her staff would control how customers are treated (which might affect revenues), the scheduling of staff (which would a

36、ffect total staff costs and service), the amount of waste and pilferage in the snack bar, and the organization of ticket and snack bar sales (which might affect total sales).11-33There are two generic problems in this setting. Are the revenues reported for this division independent of the revenues r

37、eported for the other divisions? For example: Are there interactions that require transfer pricing or do sales in renovations affect sales in other departments? If these interactions exist, it is difficult to interpret the revenue, and therefore the profits, reported by each division as the contribu

38、tion by that division to corporate profits. Similarly, if there are cost interactions (for example, the divisions use the same expensive equipment and cost allocations are used to assign the cost of that equipment to the divisions) then it is difficult to interpret the costs reported for a division,

39、 and therefore its profits, with any certainty. 11-34The response to this question will reflect the degree of autonomy the respondent feels that the center manager has. It is likely that the fitness center manager must follow head office policy concerning the wages paid, but the center manager will

40、control the number of hours worked by casual employees. If the chains policy is to build identical buildings with identical equipment, then the depreciation on the building and equipment is not controllable by the center manager.The manager should be held accountable for controllable costs and shoul

41、d not be held accountable for costs that (1) were determined or incurred by someone else and (2) cannot be changed. The reason for distinguishing between controllable and uncontrollable costs is to identify which costs the manager should be held accountable for. The controllability principle asserts

42、 that the manager should only be held accountable for controllable costs.11-35The controllability principle asserts that the manager of a responsibility center should be assigned responsibility only for the revenues, costs, or investments controlled by responsibility center personnel. Revenues, cost

43、s and investments that people outside the responsibility center control should be excluded from the accounting assessment of that centers performance. For example the manager of a production line in a factory should be evaluated based on labor and machine hours used and not on labor cost and machine

44、 cost because labor wage rates and machine costs were determined elsewhere in the organization. In this case, invoking the controllability principle will have a desirable effect if the manager perceives the performance measurement process as fairer, thereby increasing his or her satisfaction. Suspen

45、ding the controllability principle is desirable if there is a reasonable expectation that this will cause the employee to find a means of controlling the previously uncontrollable event and that the employee will feel that being asked to control the event is reasonable. For example, as described in

46、the textbook, a dairy faced the problem of developing performance standards in an environment of continuously rising costs. Because the costs of raw materials, which were between 60% and 90% of the final costs of the various products, were market determined and, therefore, thought to be beyond the c

47、ontrol of the various product managers, people argued that evaluation of the managers should depend on their ability to control the quantity of raw materials used rather than the cost.The dairys senior management announced, however, that it planned to evaluate managers on their ability to control to

48、tal costs. The managers quickly discovered that one way to control raw materials costs was to make judicious use of long-term fixed price contracts for raw materials. These contracts soon led to declining raw materials costs. Moreover, the company could project product costs several quarters into th

49、e future, thereby achieving lower costs and stability in planning and product pricing.Thus, managers, even when they cannot control costs entirely, can take steps to influence final product costs. When more costs or even revenues are included in performance measures, managers are more motivated to f

50、ind actions that can influence incurred costs or generated revenues.11-36Division C has sufficient excess capacity to supply the 200,000 units of C82 to Division D, so neither Division C nor McCann Company will incur an opportunity cost if the transfer takes place. The incremental cost for Division

51、C to manufacture the C82 for Division D is 200,000 ($20 + $12 + $8) = $8,000,000. If Division D purchases these units from the outside market, it will spend 200,000 $50 = $10,000,000 and both Division D and the McCann Company will be $2,000,000 (= $8,000,000 $10,000,000) worse off. For Division C, t

52、he transfer price should at least cover variable costs of $40. For Division D, the transfer price should be less than $50. So to induce an internal transfer, the transfer price should be between $40 and $50.11-37When transfer prices are used for internal purposes they are generally intended to motiv

53、ate the decision maker to act in the organizations interest. However, when transfer prices are used for international transfer pricing, managers have an incentive to choose transfer prices to minimize the organizations total tax liability by locating most of its profit in the lower-tax country. The

54、objectives for internal purposes and international tax purposes are often conflicting. Tax authorities are well aware of the tax incentives, and therefore examine international transfer pricing policies of companies conducting business under the authorities jurisdiction. The 1995 Organization for Ec

55、onomic Co-operation and Development (OECD) guidelines (Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (Paris: OECD, 1995) indicate that whenever possible, transfer prices should reflect market or economic circumstances. If an organizations domestic transfer pricing

56、 system has been designed to reflect economic considerations, then its international transfer pricing system should be the same. Moreover, using one system for domestic transfer pricing and a different system for international transfer pricing is likely to trigger investigation by taxing authorities

57、. 11-38Transfer prices can be based on market prices, based on costs, negotiated, or set by some arbitrator or administrative rule. There are market prices for raw logs. However, the number of logs that this company buys in these markets would likely be small compared to the number of logs that are

58、processed internally. The transfer price could be based on the costs of maintaining the forests and logging costs. However, logs suitable for a sawmill are more valuable than logs suitable for a pulp mill, and cost-based transfer pricing would not reflect this. If a reliable market price is availabl

59、e, it can be used as the transfer price.The real issue here is the benefit to the organization of treating the logging and finishing divisions (the saw mills and the pulp mills) as profit centers. If company success is determined by having the appropriate supply of trees at the appropriate time, those c