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cma course p1 : unit16

cma course part 1 :  lectures and some questions about each unit


MR:amr taison
MR:mohamed cma
(16.1) Responsibility Centers
1) Decision Making and Decentralization
2) Responsibility Centers
3) Performance Measures and Manager Motivation
4) Allocating Common Costs
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
(16.2) Performance Measures -- Cost, Revenue, and Profit Centers (Contribution Margin Reporting)
1) Cost Centers and Revenue Centers
2) Profit Centers
3) Segment Reporting
MR:amr taison
MR:mohamed cma
MR:desoky kh.
(16.3) Performance Measures -- Investment Centers
1) Purpose
2) Return on Investment (ROI)
3) Residual Income
4) Comparability Issues with Investment Center Performance Measures
5) ROI vs. Residual Income
6) Revenue and Expense Recognition Policies
7) Nonfinancial Measures
MR:amr taison
MR:mohamed cma
MR:desoky kh.
(16.4) The Balanced Scorecard
1) Key Performance Indicators (KPIs)
2) SWOT Analysis
3) PEST Analysis
4) measures for each KPI
5) Possible KPIs and Measures
6) Scorecard Development
7) Scorecard Functionality
MR:amr taison
MR:mohamed cma
MR:desoky kh.
MR:m.batayneh
(16.5) Transfer Pricing
1) Purpose
2) Transfer Pricing Schemes
3) Choice of Transfer Pricing Policy
4) Dual Pricing
G.2020G.2021mr.amro taison
12.1,516.1lec. 24
12.216.2lec. 24
12.3,416.3lec. 24
9.616.4lec. 19
12.616.5lec. 24
Some Questions about unit 16
1- How is decision-making in central organizations?
In a centralized organization, the decision-making process is consolidated, so that the activities at the organization level are coordinated more effectively
2- How is decision-making in decentralized organizations?
Decision making in a decentralized organization is at as low a level as possible.
3- What are the responsibility centers?
1) responsibility centers (strategic business units)
2) cost center
---- Service centers
3) revenue center
4) profit center
5) investment center
4- What is goal congruence?
The performance measures should be designed so that the manager's pursuit of them is directly related to the achievement of the organization's overall goals.
5- What are the effects of arbitrary allocations?
1) Managers’ morale may suffer
2) Dysfunctional conflict may arise among managers
3) Resentment may result if cost allocation is perceived to be arbitrary or unfair.
6- What are the two specific approaches to common cost allocation?
1) Stand-alone method
2) Incremental method
7- What is the effect of contribution margin to reporting?
* Contribution margin approach to reporting is very useful in measuring the performance of profit centers.
* The contribution margin approach isolates the effects of variable and fixed costs, and thus focuses on the effects of the manager's choices, related to the improvement of the contribution margin.
8- What is the segment?
The segment is that considered meaningful to the company, such as:
- Production line
- Geographic area
- A useful sub-unit of the company
9- What are the benefits of customer profitability analysis?
By analyzing customer profitability, management is able to make decisions regarding continuing to serve a given customer.
10- What are the Issues involved in determining the profitability of (product, business unit and customer)?
1) Cost measurement
2) Cost allocation
3) Investment measurement
4) Other measures
11- What is the purpose of Performance measures?
Performance measures for investment centers reflect the manager's efficiency in allocating capital to produce income for the company.
Thus, performance measures are related to the resources and income of the center
12- What is the return on Investment (ROI)?
The return on investment is the relationship that arises between (income and investment in assets) in order to generate this income.
13- What is the ROI equation?
ROI = income of business unit ÷ assets of business unit
14- What are the benefits of ROI application?
(For ex. not limited to)
* Improve projects
* Secure funding
* Comparative analysis
* Discontinue ineffective products or operations
15- What is the residual Income equation?
Residual income = Income of business unit – (Assets of business unit × required rate of return)
16- What are KPIs?
[Key Performance Indicators]
They are elements (financial and non-financial), these are specific, measurable and reflect the company's performance which are vital to its competitive advantage.
17- What is SWOT Analysis?
It is an analysis that shows the company's key performance indicators. Through this analysis, the company can determine the following:
S: strengths.
W: weaknesses
O: opportunities
T: threats
18- What is PEST Analysis?
It is an analysis of specific factors of a company's external environment.
19- What are the four classifications of objectives, according to balanced scorecard?
Balanced scorecard classifies objectives into one of four perspectives on the business.
[Financial - customer satisfaction - internal business processes - learning and growth].
20- What are the transfer prices?
It is the difference between
Transfer prices are the amounts charged by one segment of the company due to the transfer of goods and services from this segment to another within the company
21- What are the four basic methods of transfer price?
1) Variable cost
2) Full cost
3) Market price
4) Negotiated price.
22- What are the factors that the choice of (transfer pricing policy) depends on?
1) Goal congruence factors
2) Segmental performance factors
3) Negotiation factors
4) Capacity factors
5) Cost structure factors
6) Tax factors
23- What is the dual pricing?
Buying and selling units record transfer price at different values (different prices , not only one price).
For example, the seller can record the transfer to another segment as a sale at the usual price of market that an external party would pay. However, the buyer would record a purchase at the variable production cost.
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