Chapter 13

Question	Answer
Administrative Department	performs management activities that benefit the entire organization and include the human resources, accounting, legal, and insurance departments as well as organizational headquarters.
Advance Pricing Agreement (APA)	a binding contract between a company and one or more national tax authorities that provides details of how a transfer price is to be set and establishes that no regulatory adjustments or penalties will be made if the agreed-upon methodology is used
Algebraic Method	a process of support department cost allocation that considers all interrelationships of the departments and reflects these relationships in simultaneous equations.
Benefits provided ranking	a listing of support departments in an order that begins with the one providing the most support to all other corporate areas and ends with the support department providing support primarily to revenue producing areas.
Centralization	a management style that exists when top management makes most decisions and controls most activities of the organizational units from the company's central headquarters.
Cost Center	is an organizational unit whose manager has the authority only to incur costs and is specifically evaluated on the basis how well costs are controlled.
decentralization	a management style that exists when top management grants subordinate managers a significant degree of autonomy and independence in operating and making decisions for their organizational units.
Direct method	assigns support department costs only to operating areas.
Dual pricing agreement	a transfer pricing method that allows a selling division to record the transfer of goods or services at one price and buying division to record the transfer at another price.
Goal congruence	a circumstance in which the personal and organizational goals of decision makers throughout a firm are consistent and mutually supportive.
investment center	a responsibility center in which the manager is responsible for generating revenues; planning and controlling expenses; and acquiring, disposing of, and operating assets to earn the highest rate of return feasible on those assets given the center;s mission
negotiated transfer prices	an intracompany charge for goods or services set through a process of negotiation between the selling and purchasing unit managers
profit center	a responsibility center for which the manager is accountable for generating revenues and planning and controlling all expenses.
pseudo-profit center	a center created when one responsibility center uses a transfer price to artificially sell goods or services to another responsibility center.
responsibility accounting system	facilitates decentralization by providing information about the performance, efficiency and effectiveness of organizational subunits and their managers.
responsibility center	a division department or geographic reason.
responsibility report	a report that reflects the revenues and/or costs under the control of a particular unit manager.
revenue center	a responsibility center for which the manager is accountable only for the generation of revenues and has no control over setting selling prices, or budgeting or incurring cost
sales price variance	a revenue variance that indicates the financial difference between the actual and budgeted sales prices for the actual number of units sold
sales volume variance	a revenue variance that indicates the difference caused by actually selling more or fewer units than budgeted multiplied by the budgeted sales price.
service department	an organizational unit that provides one or more specific functional tasks for other internal units.
shared service	a separate business unit created within a company or agency accountable for delivering a suite of services to both the operating business units and the corporate functions.
step method	f
sub optimization	a situation in which an individual manager pursues goals and objectives that are in his/her own and his/her segment's particular interests rather than in the company's best interests.
support document	consist of service and administrive
transfer price	is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price.

Next up

Description

Resource summary

Similar

	Created by Antonio Orange about 9 years ago