BUS 215 Chapter Notes - Chapter 11: Earnings Before Interest And Taxes, Profit Center, Uptodate
Chapter 11 Notes
• Decentralized organization: decision-making authority is spread
throughout the organization rather than being confined to a few top
executives
• Advantages:
o Top managers can concentrate on bigger issues
o Puts decision-making authority in the hands of those who tend
to have most up-to-date info. about everyday operation, the
lower-level managers
o Orgs. can respond quickly to customers b/c of taking out layers
of decision making and approval
o Helps train lower-level managers
o Empowers lower-level managers to make decisions
• Disadvantages
o Lower-level managers may make decisions without fully
uderstadig the copay’s overall strategy
o If lower-level managers make their own decisions independently
of each other, coordination may be lacking
• Responsibility center: used for any part of an organization whose
manager has control over and is accountable for cost, profit, or
investments
o Cost center: manager of this has control over costs, but not over
revenue or the use of investment funds
▪ Ex: service departments such as accounting, finance,
general admin., legal
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