Chapter 24: Q24-7RQ (page 1355)
What is a responsibility center?
Answer
The responsibility center refers to the section or unit of an organization responsible for specific tasks assigned to the same.
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Financial performance is measured in many ways.
Requirements
1. Explain the difference between lag and lead indicators.
2. The following is a list of financial measures. Indicate whether each is a lag or a lead indicator:
a. Income statement shows net income of \(100,000
b. Listing of next week’s orders of \)50,000
c. Trend showing that average hits on the redesigned Web site are increasing at 5% per week
d. Price sheet from vendor reflecting that cost per pound of sugar for the next month is $2
e. Contract signed last month with large retail store that guarantees a minimum shelf space for Grandpa’s Overloaded Chocolate Cookies for the next year
Explain the difference between a lag indicator and a lead indicator.
Padgett Company has compiled the following data:
Net sales revenue $1,000,000
Operating income 60,000
Average total assets 400,000
Management’s target rate of return 12%
Compute the following amounts for Padgett:
What are some limitations of financial performance measures?
What is a transfer price?
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