Accounting › Section V · Responsibility accounting and decentralization › Topic V.3
How decisions affect responsibility-center evaluation
The way a manager is measured changes the decisions that manager makes. Controllable costs, allocated costs, investment measures and transfer prices can all push a segment manager towards choices that help the segment's report but hurt the company, unless the evaluation is designed with care.
In this topic
- Measures shape decisions
- Controllable and uncontrollable costs
- Allocated costs
- Worked example: a shop manager's report
- Short-term savings, long-term costs
- Worked example: a project that lowers ROI
- Transfer prices
- Three ways to set a transfer price
- Capacity and the price range
- Worked example: flour for the Bakery Division
- Common mistakes to avoid
- Key takeaways
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