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Chapter 24: Q1RQ (page 1355)

Explain the difference between a centralized company and a decentralized company.

Short Answer

Expert verified

The act of solidifying control and specialist within the hands of top administration is known as centralization. Decentralization, on the other hand, portrays the top-down exchange of specialists to functional-level administration.

Step by step solution

01

Meaning of Centralized Company

Top-down decision-making is fundamentally favoured in centralized organizational structures. One individual or an official group must endorse all suitablechoices and be communicated through numerous levels of administration.

02

Difference between a centralized company and a decentralized company.

The owner or senior management makes all planning and managing decisions in a small business. Small businesses are commonly considered centralized since doing so is more straightforward given the scale of their activities.

Decentralized companies divide their activities into many sections or departments. Geographical (domestic and international), the client (commercial and residential), product (motorcycles and all-terrain vehicles), company function (sales and service), or another business attribute may be the basis for decentralization.

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Most popular questions from this chapter

Well-designed performance evaluation systems accomplish many goals. Describe the potential benefits performance evaluation systems offer.

Fill in the blanks with the phrase that best completes the sentence.Some phrases may be used more than once and some not at all.

Phrases:

  • cost center
  • revenue center
  • investment center
  • lower
  • profit center
  • higher
  • responsibility center

1. The maintenance department at the local zoo is a(n)___________

2. The gift shop at the local zoo is a(n)____________

3. The menswear department of a department store, which is responsible forbuying and selling merchandise, is a(n)_______________

4. The production line at a manufacturing plant is a(n)

5. A( n)________________is any segment of the business whose manager isaccountable for specific activities.

6. A division of a beverage manufacturing company responsible for aparticular brand of soft drink is a(n)_______________

7. The sales manager in charge of a shoe company鈥檚 northwest sales territoryoversees a(n)

8. Managers of cost and revenue centers are at_____________ levels of theorganization than are managers of profit and investment centers.______

Question: Using ROI and RI to evaluate investment centers

This problem continues the Piedmont Computer Company situation from Chapter 23. Piedmont Computer Company reported 2020 sales of \(3,600,000 and operating income of \)183,600. Average total assets during 2020 were $600,000. Piedmont Computer Company鈥檚 target rate of return is 16%.

Calculate Piedmont Computer Company鈥檚 profit margin ratio, asset turnover ratio, ROI, and RI for 2020. Comment on the results.

List the disadvantages of decentralization.

One subunit of Track Sports Company had the following financial results last month:

Subunit X Actual Results Flexible Budget Flexible Budget % Variance

Variance (F or U) (F or U)

Net Sales

Revenue \( 474,000 \) 455,000

Variable

Expenses 261,000 255,000

Contribution

Margin 213,000 200,000

Traceable

Fixed Expenses 38,000 29,000

Divisional

Segment Margin \( 175,000 \) 171,000

Requirements

1. Complete the performance evaluation report for this subunit (round to two decimal places).

2. Based on the data presented and your knowledge of the company, what type of responsibility center is this subunit?

3. Which items should be investigated if part of management鈥檚 decision criteria is to investigate all variances equal to or exceeding \(8,000 andexceeding 10% (both criteria must be met)?

4. Should only unfavorable variances be investigated? Explain.

5. Is it possible that the variances are due to a higher-than-expected sales volume? Explain.

6. Will management place equal weight on each of the variances exceeding \)8,000? Explain.

7. Which balanced scorecard perspective is being addressed through this performance report? In your opinion, is this performance report a lead or a lag indicator? Explain.

8. List one key performance indicator for the three other balanced scorecard perspectives. Make sure to indicate which perspective is being addressed by the indicators you list.
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