Responsibility Accounting and Transfer Pricing

It is a system of accounting that is implemented to an organization so that performance is recorded, reported and evaluated by levels of responsibility within an organization.

• Cost Accounting

• Financial Accouting

• Standard Cost Accounting

• Responsibility Accounting

Why would a company adopt a decentralized organization?

• To train and motivate divisions managers

• To let top management focus on strategic planning

• To allow division managers to make important operating decisions

• all of the above

The basic purpose of a responsibility accounting system is

• Authority

• Budgeting

• Motivation

• Variance Analysis

IN responsibility accounting, a center's performance is measured by controllable costs. Controllable costs are best best described as including

• Only discretionary costs

• Direct material and direct labor only

• Those costs about which the manager is knowledgeable and informed

• Only those costs that the manager can influence in the current period

A successful responsibility accounting reporting system is dependent upon

• The correct allocation of controllable variable costs

• The proper delegation of responsibility and authority

• Identification of the management level at which all costs are controllable

• A reasonable separation of costs into their fixed and variable components since fixed

Characteristics of responsibility accounting system include all of the following except that,

• Cost centers are responsible for revenues as well as common costs

• The system should encourage employee involvement and participation

• Each level of management is responsible for its department's operations and employees

• Responsibility for performance according to budget must be linked to the appropriate authority

The criteria used for evaluating performance

• should be designed to help achieve goal congruence

• motivate people to work in the company's best interest

• Can only be used with profit centers and investment centers

• should be used to compare past performance with current performance

ABC Corporation uses a responsibility accounting system in its operations. Which one of the following items is least likely to appear in a performance report for a manager of one of ABC's assembly lines?

• Materials

• Direct labor

• Repairs and Maintenance

• Depreciation on the manufacturing facility

The segment margin of Division A and ABC Corporation should not include

• Net Sales of Division A

• Fixed Selling expenses of Division A

• Variable selling expenses of Division A

• Division A's fair share of the salary of ABC Corporation's president

A responsibility center where managers are held responsible for both revenues and costs of the segment

• Cost center

• Profit center

• Revenue Center

• Investment Center