RSM222H1 Chapter Notes - Chapter 11: Fixed Cost, Longrun, Cost Leadership
Document Summary
Decentralized organization an organization in which decision-making is spread throughout the organization rather than being confined to a few top executives. Effective decentralization requires segment reporting to permit analysis and evaluation of the decisions made by the segment managers. A segment is defined as a part or activity of an organization about which managers would like cost, revenue, or profit data. Quality of conformance refers to the degree to which a product or service meets or exceeds its design specifications and is free of defects and other problems that mar its appearance or degrade its performance. If a company has a well-run quality program, when prevention and appraisal costs are increased, internal and external failure costs should decrease. Segment margins show the company"s divisional managers how much each of their divisions is contributing to the company"s profits. In summary, two guidelines are followed in assigning costs to the various segments of a company under the contribution approach: o o.
