Chapter 11 is entitled "Segment Reporting, Decentralization

and the Balanced Scorecard". In this chapter we examine

the different types of "Responsibility Centers" specifically the
Cost Center, Profit Center and Inventment Center.
Additionally we discover the computations required for
"Residual Income", Return on Investment, Segment
Margin and "Economic Value Added" (EVA). For this
discussion, choose any of the topics/terms above, or any
other topic of interest from Chapter 11 as the basis of your
post to this discusion forum.
In a private medical practice with multiple doctors building a
segmented income statement for the practice as a whole
would be very useful. Splitting the company into divisions
based on the physicians. For example company 1 divided
into divisions for physician A and physician B. This
segmented income statement would allow managers to
more appropriately evaluate the performance of each
physician individually. Some of the Common fixed costs
would include the salary for the accountant, the
maintenance cost for the practice space, the office secretary
and front desk staff, the utilities costs and other
miscellaneous practice overhead. Some of the traceable
fixed costs would be the medical assistant of physician A and
B and the malpractice insurance for physician A and B.
These are considered traceable fixed costs because if the
physician were to leave the practice those costs would leave
with too. Identifying the common fixed costs and traceable
fixed costs is important so that the traceable fixed cost can
be charged to the division of physician A or B and not both
whereas the common fixed cost would be shared. From this
information a segment margin can be calculated to gauge
the long-run profitability of the physician. Therefore if a
physician is not creating enough revenue to cover his/her
costs the segments contribution to the margin would be low
or negative and their performance would need to be
evaluated. The segmented income statement for a private
medical practice would clarify which physician is responsible
for which cost and how they are contributing to the practice

as a whole. Using this method the practice could use these

accounting methods to help evaluate physicians financial
performance.