Management and Organizational Studies 3370A/B Chapter Notes - Chapter 11: Total Absorption Costing, Profit Center, Balanced Scorecard

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Barry Hawn

Document Summary

Decentralization in organizations: decentralized organization an organization in which decision making is spread throughout the organization rather than being confined to a few top executives, all large organizations are decentralized to some extent. Assigning costs to segments: segment statements for internal use are typically prepared in the contribution format, fixed costs are divided into traceable and common. Sales and contribution margin: by carefully monitoring segment cm and segment cm ratios, the manager is in a position to make those short-run decisions that maximize each segment"s contribution to the overall profitability of the organization. Identifying traceable fixed costs: the general guideline is to treat as traceable costs only those costs that would disappear over time if the segment itself disappeared. Breakdown of traceable fixed costs: some managers like to break down traceable fixed costs into two classes discretionary and committed. Segment margin: segment margin a margin obtained by deducting a segment"s traceable fixed costs from the segment"s contribution margin.