About This Chapter
Responsibility Centers & Reporting Segments - Chapter Summary
This chapter has been constructed as a study guide to help you review all the important information about responsibility centers and reporting segments. As you can see from the chapter menu, each lesson topic focuses on a single aspect, making it easier for you to focus on one area before moving on to the next. By completing the chapter, you will have gained the skills to do the following:
- Review how cost centers build responsibility reports
- Show the formula used for investment center evaluations
- Distinguish negotiated, cost-based, and market-based transfer pricing
- Determine the tools used for basic segment reporting
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1. Creating a Responsibility Report for a Cost Center
There is one simple rule when it comes to writing a responsibility report for a cost center - keep costs low! In this lesson, you'll find out how to express that by using a responsibility report.
2. Investment Center Evaluation: Formula & Residual Income
Investment centers are related to other responsibility centers, but their unique makeup means that there has to be a different way of evaluating them. In this lesson, we will learn how to do that.
3. Negotiated Transfer Pricing: Definition & Examples
Transfer pricing is an important part of the internal bookkeeping of an organization. In this lesson, we'll look at negotiated transfer pricing, a method by which companies keep track of hard-to-price goods.
4. Cost-Based Transfer Pricing: Definition & Example
Companies that favor one practice area over another may be tempted by cost-based transfer pricing. However, the fact of the matter is that all subsidiaries have the potential to lose out.
5. Market-Based Transfer Pricing: Definition & Computation
Market-based transfer pricing is, generally speaking, the best form of transfer pricing available to companies. In this lesson, we'll discuss how it works and why it is the preferred choice.
6. Segment Reporting Basics & Tools
Segment reporting allows management to assess the profitability of divisions or product lines. In this lesson, you will learn how to prepare a segmented income statement and use the information to make decisions.
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