ACCT 102 Chapter Notes - Chapter 7: Profit Center, Variable Cost, European Cooperation In Science And Technology
Document Summary
Chapter 7: standard costs, repsonsibilities, accounting, and cost allocation. Responsibility accounting = profitability accounting = activity accounting the system for collecting and reporting revenue and cost information by areas of responsibility. 3 basic conditions that must be met for an effective responsibility accounting system: Well-defined org structure where management responsibilities and authorities are clearly established and understood. Standards of performance in revenues, costs, and investments must be properly determined and well defined. The responsibility accounting reports (or performance reports) should include only the items that are controllable by the manager of the responsibility center; they should highlight items that a call for managerial attention. Responsibility center a unit in the organization which has control over costs, revenues, and/or investment funds. 2 key performance measures: return on investment and residual income. You must establish standard costs and evaluate performance by comparing actual costs with the standard costs.
