Accounting

Management Control in Decentralized Organizations

C H A P T E R

LEARNING OBJECTIVES

When you have finished studying this chapter, you should be able to:

1. Define decentralization and identify its expected benefits and costs. 2. Distinguish between responsibility centers and decentralization. 3. Explain how the linking of rewards to responsibility-center performance metrics affects incentives and risk. 4. Compute ROI, economic profit, and economic value added (EVA) and contrast them as criteria for judging the performance of organization segments. 5. Compare the advantages and disadvantages of various bases for measuring the invested capital used by organization segments. 6. Define transfer prices and identify their purpose. 7. State the general rule for transfer pricing and use it to assess transfer prices based on total costs, variable costs, and market prices. 8. Identify the factors affecting multinational transfer prices. 9. Explain how controllability and management by objectives (MBO) aid the implementation of management control systems.

ISBN: 0-536-47129-0 Introduction to Management Accounting: Chapters 1-17, Fourteenth Edition, by Charles T. Horngren, Gary L. Sundem, William O. Stratton, David Burgstahler, and Jeff Schatzberg. Published by Prentice Hall. Copyright © 2008 by Pearson Education, Inc.

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