ACCT 2102 1nd Edition Lecture 15 Outline of Last Lecture II No Class Outline of Current Lecture III Performance Evaluation a Decentralized Operations b Performance Systems c Performance Reports Current Lecture Performance Evaluation Decentralized Operations In this chapter we focus on what we want to operate and what our managers are responsible for IN this case we use Decentralized Operations which deal with operations in different places It is used to figure out how we are going to divide the company The advantages to this system is that it frees top management helps management look at the future and set goals encourages the use of expert knowledge provides training and improves motivation and retention Decentralized Operations have disadvantages as well It duplicates costs and has problems with goal congruence the goals of the company equaling he goals of management Performance Evaluation Systems Overall performance evaluation systems should clearly communicate expectations provide benchmarks or results for operations motivate segment managers try to achieve goal congruence and minimize duplication costs There are four different types of systems that are used The Cost Responsibility Center compares actual costs to budgeted costs using a performance report or budget versus actual report The Revenue Responsibility Center is rarely used but it compares actual revenue to budgeted revenue using performance reports The Profit These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Responsibility Center compares actual revenues expenses and profits to the budget using performance reports and segmented income statements The last is the Investment Responsibility Center which determines if assets were used efficiently to generate profit using Return on Investment and Residual Income Performance Reports These reports compare actual revenue and expenses against budgeted revenue and expenses to calculate a variance difference There are two kinds A favorable variance is when actual revenue is greater than budgeted revenue A favorable variance can also appear when actual expenses are less than budgeted expenses Unfavorable variances appear when actual revenue is less than budgeted revenue or when actual expenses are greater than budgeted expenses