Responsibility Centers

1. Revenue Center Segment is responsible for the revenue of a unit. The Reservations Department of an airline. Responsibility Centers Cost Center Segment has control over the incurrence of costs. The Paint Department in an automobile plant.

2. Investment Center Segment has control over profits and invested capital. A division of a large corporation. Responsibility Centers Profit Center Segment hascontrol overbothcosts and revenues. Company-owned restaurant in a fast-food chain.

3. Cost Center Profit Center Investment Center Measuring Management Performance Evaluation Tool Cost standards Contribution income statement Rate of return on invested funds or residual income

4. Product Lines • • Sales Territories Segmented Reporting

5. Key Features of Segmented Reporting • Contribution format. • Controllable versus uncontrollable expenses. • Segmented income statement.

6. Design Grade Conformance Quality Total Quality Management

7. Total Quality Management Ranking between products or services having the same functional use. Degree to which actual product or service meets its design specs. and is free of mfg. defects. Grade Quality of Design Quality of Conformance Judged by . . . Requires a certain . . . Must be sup- ported by . . . Product meets customer expectations for the grade level chosen. Customers

8. Traditional Perspective of Product Quality Total Quality Costs Costs Prevention and Appraisal Costs Failure Costs Percentage of Defective Products 0% 100% Minimum

9. ISO 9000 Standards • The International Standards Organization (ISO), require that a manufacturer have a well-defined quality control system in place, and that the target level of product quality be maintained. • Sustain quality of product. • Effective quality control system in place. • Provide purchaser confidence in the product.