BMGT 221 Chapter Notes - Chapter Chapter 11 : Earnings Before Interest And Taxes, Netbook, Income Approach

• School: University of Maryland
• Department: Business and Management
• Course: BMGT 221
• Professor: Gary Bulmash

Document Summary

Chapter 11 performance measurement in decentralized organizations - accounting 2 notes. Decentralization in a decentralized org, decision making authority is spread throughout the organization rather than being confined to a few top executives. Responsibility accounting systems cost, profit, and investment. Profit center: manager of profit center has control over both costs and revenue but not over the use of investment funds, evaluated by comparing actual profit to targeted or budgeted profit. Investment center: manager of investment center has control over cost, revenue, and investments in operating assets, evaluated using roi (return on investment/residual income) measures. Roi return on investment: roi = net operating income/average operating assets, higher the roi, greater the profit earned per dollar invested, roi = margin * turnover, margin = net operating income / sales. Improved by increasing selling prices, reducing operating expenses or increasing unit sales: turnover = sales/average operating assets. Net operating income income before interest and tax.