Chapter 24: Q9RQ (page 1355)
What is a performance evaluation system?
A performance evaluation system is systematic performance evaluation of an employees’ job.
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Management by exception is a term often used in performance evaluation. Describe management by exception and how it is used in the evaluation of cost, revenue, and profit centers.
One subunit of Harris Sports Company had the following financial results last month:
Harris—Subunit X Actual Results Flexible Budget Flexible Budget Variance (F or U) % Variance (F or U)
Direct Materials
Direct Labor 13,000 13,800
Indirect Labor 26,400 23,100
Utilities 12,300 11,300
Depreciation 25,000 25,000
Repairs and Maintenance 4,600 5,600
Total
Requirements
1. Complete the performance evaluation report for this subunit. Enter the variance percent as a percentage of the budgeted amount rounded to two decimal places.
2. Based on the data presented, what type of responsibility center is this subunit?
3. Which items should be investigated if part of management’s decision criteria is to investigate all variances exceeding $2,500 or 10%?
4. Should only unfavorable variances be investigated? Explain.
Decentralization divides company operations into various reporting units. Most decentralized subunits can be described as one of four different types of responsibility centers.
Requirements
1. Explain why companies decentralize. Describe some typical methods of decentralization.
2. List the four most common types of responsibility centers, and describe their responsibilities.
Usually, which outweighs the other in decentralization—advantages ordisadvantages?
What does RI measure?
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