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Responsibility Centers

:
Revenue and Expense
Centers

 Implementing strategies made by management Nature .

Relations: Input & Direct & Causal Indirect Output .

thus most companies don’t try measure the value.   Measuring Input Measureme nt of Input & Output Measuring output is harder than measuring input. .

the more effective Effectivenes ss the unit s • Hard to be quantified • Efficient: Doing things right • Effective: Doing the right things . yet more output is produced Efficiency & • The more output contributes to Effectivene objective. • Ratio of Output per Input Efficiency • Efficient if input is minimum.

Revenue • Output measured in Centers monetary terms Expense • Inputs are measured Types of Centers Responsibili • Both revenues (Output) ty Centers Profit and Expense (input) are Centers measured Investme • Relationship between nt profit and investment are measured Centers .

 Output is measured in monetary terms. no formal Revenue attempt in relating input or output  Typically marketing or sales unit Centers  Can be measured with quota and budgets as well .

increase • To maximize information & resource communication sharing between divison • To facilitate budgeting process Case 4-1 managers Q5: Change • So that managers are more Redesigning compensation system and motivated to maximize profit by using cost Manageme reassignment over profit • To achieve goal congruence nt Control Structure Improve comparison of • To help contribute in corporate’s bottom line manufacturing • Make an example out of the most efficiency efficient division between divisions .