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ADMS 2510 (64)
Lecture

chapter 11.docx

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Department
Administrative Studies
Course
ADMS 2510
Professor
Alison Beavis
Semester
Winter

Description
Chapter 11 Decentralized organization: An organization in which decision making is spread throughout the organization rather than being confined to a few top executives  A segment is defined as a part or activity of an organization about which managers would like cost, revenue, or profit data.  A segment is defined as a part or activity of an organization about which managers would like cost, revenue, or profit data. Traceable fixed costs: Fixed costs that can be identified with a particular segment and that arise because of the existence of the segment. Common fixed cost: A fixed cost that supports the operations of more than one segment but is not traceable in whole or in part to any one segment.  traceable fixed costs are charged to the segments, but common fixed costs are not.  In preparing segmented income statements, some managers like to separate the traceable fixed costs into two classes—discretionary and committed.  The amount remaining after deducting the discretionary fixed costs, sometimes called a segment performance margin, Segment margin: A segment margin is obtained by deducting a segment's traceable fixed costs from the segment's contribution margin. Responsibility centre: Any business segment whose manager has control over cost or profit or the use of investment funds. Cost centre: A business segment whose manager has control over cost but has no control over revenue or the use of investment funds. Profit centre: A business segment whose manager has control over cost and revenue but has no control over the use of investment funds. Investment centre: A business segment whose manager has control over cost and revenue and also has control over the use of investment funds. Transfer price: The price charged when one division or segment provides goods or services to another division or segment of an organization. Suboptimization: An overall level of profitability that is less than a segment or a company is capable of earning. Negotiated transfer price: A transfer price agreed on between buying and selling divisions. Range of acceptable transfer prices: The range of transfer prices within which the profits of both the selling division and the purchasing division would increase as a result of a transfer.  Selling division with idle capacity: Transfer price ≥ Variable cost per unit  Selling division with no idle capacity:   Selling division with some idle capacity:  Selling devision with no idle capacity   Seller's perspective:  Purchaser's perspective:  Market price: The price b
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