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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

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’s 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.______

Explain the difference between market-based transfer prices and cost-based transfer prices.

List the advantages of decentralization.

What is a transfer price?

Henderson Company manufactures electronics. The Calculator Division (an investment center) manufactures handheld calculators. The division can purchase the batteries used in the calculators from the Battery Division (another investment center) or from an outside vendor. The cost to purchase batteries from the outside vendor is 5.ThetransferpricetopurchasefromtheBatteryDivisionis6. The Battery Division also sells to outside customers. The sales price is 6,andthevariablecostis3. The Battery Division has excess capacity.

Requirements

1. Should the Calculator Division purchase from the Battery Division or the outside vendor?

2. If Henderson Company allows division managers to negotiate transfer prices, what is the maximum transfer price the manager of the Calculator Division should consider?

3. What is the minimum transfer price the manager of the Battery Division should consider?

4. Does your answer to Requirement 3 change if the Battery Division is operating at capacity?
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