ACCT 463 Lecture Notes - Lecture 5: Transfer Pricing, Gross Margin, Financial Accounting

• School: McGill University
• Department: Accounting
• Course: ACCT 463
• Professor: Philippe Levy

Document Summary

Financial results controls: result controls have many undefined initiatives: 1. Financial results control systems: three core elements, 1. Financial responsibility centers: focus on appointing accountability for financial results within organization: 2. Planning and budgeting systems: setting performance targets: 3. Investment centers: managers are held accountable for profit in relation to invested assets, e. g. top managers (chief executive, vps) Example measures: roi (return on investment), roe (return on equity), roa (return on assets), eva (economic value added = net profit opportunity cost of firm"s capital) Profit centers: managers are held accountable for profits but not for the investments made to generate them, goal may not always be to maximize profit break-even. In control of: revenues and expenses (cost: example measures: gross margin (gross profit/net sales), marketing margins, profit. Cost centers: managers are held accountable for some elements of cost, example: standard cost center compare standard cost with actual cost incurred. Undermine benefits of decentralization: reduces autonomy: decision-making becomes complex.