ECOS3003 Lecture Notes - Lecture 10: Opportunity Cost, Fixed Capital, Fixed Cost
30 Jul 2018
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Divisional performance evaluation: most organizations have some subunits which are granted decision rights and are evaluated on performance, note organizational architecture performance evaluation and reward systems are consistent with decision rights granted to unit manager. Each unit can be characterized into one of five categories based on the decision rights it has been granted and the way its performance is evaluated. Sometimes, minimum average cost note, not the same as maximizing value (mr = mc is not necessarily the same as atc minimized). I(cid:374) su(cid:373)(cid:373)ary, (cid:272)e(cid:374)tral (cid:373)a(cid:374)agers (cid:374)eed a(cid:374) u(cid:374)dersta(cid:374)di(cid:374)g of the u(cid:374)it(cid:859)s (cid:272)ost stru(cid:272)ture, deter(cid:373)i(cid:374)e (cid:448)alue - maximizing output level, monitor quality and set up appropriate rewards. Cost centre manager needs specific knowledge of optimal input mix. Implication: users not charged directly, hence over-demand: have a tendency to increase in size (centre grows faster than whole organization), could use benchmarking against other firms, reorganize under control of largest user. Revenue centres: marketing activities of selling, distribution, servicing finished product.
