【正文】 s division’s ROI. Facing a possible promotion, he chose to maintain the division’s high ROI rather than earn extra profits for the pany. The decision was motivated by selfinterest. Some may argue that the decision was encouraged by the pany’s reward system. This argument, however, is weak since it is virtually certain that the intent of higher management is to reward productive behavior, not manipulative behavior. From this perspective, the decision was wrong and, thus, uhical. However, Fred might argue that the true objective of the firm is to encourage and reward high return on investment. He may be able to develop an acceptably high ROI project in the next eight to 10 months. Thus, not accepting the immediate project may give him the ability to invest in a more profitable project later on. CYBER RESEARCH CASE 230 10–22 Answers will vary. 。 he needs to determine why (., a more efficient cost structure) and whether this will also affect his own outside sales. 227 10–18 1. $120 2. Minimum: $108 Maximum: $120 Actual: $114 3. ($90 + $44)/2 = $67 Appliance Division: Additional revenue ($67 2,000) ........................... $ 134,000 Additional expenses ($44 2,000) ......................... 88,000 Additional profit ..................................................... $ 46,000 Manufactured Housing Division: Reduction of costs ($90 – $67) 2,000.................. 46,000 Total addition to profits ......................................... $ 92,000 228 10–19 1. The segment information prepared for public reporting purposes may not be appropriate for the evaluation of segment management performance because: ? An allocation of mon costs incurred for the benefit of more than one segment must be included for public reporting purposes. ? Common costs are generally allocated on an arbitrary basis. ? The segments identified for public reporting purposes may not coincide with actual management responsibilities. ? This information does not distinguish between a segment that is a poor investment and the performance of a manager who has done well despite adverse circumstances. 2. If their performance is evaluated on the basis of the information in the annual financial report, Webster Corporation’s segment managers may bee frustrated and dissatisfied because they would be held responsible for an earnings figure that includes the arbitrary allocation of mon costs and costs traceable to but not controllable by them. Performance evaluation on this basis would be demotivating. As a result of this dissatisfaction, managers may seek employment elsewhere. 3. Webster Corporation should define responsibility centers that coincide with managers’ actual responsibilities rather than using the segment rules developed for public financial reporting. All reports should be prepared utilizing the contribution approach which would separate costs by behavior and assign costs to segments only if they could be controlled by the segment. The report should disclose contribution margin, contribution controllable by segment managers, and contribution by each segment after the allocation of mon costs. 10–20 1. $200, because it could purchase the motor externally for that price. 2. $195, because that is equal to variable cost。 210 CHAPTER 10 DECENTRALIZATION: RESPONSIBILITY ACCOUNTING, PERFORMANCE EVALUATION, AND TRANSFER PRICING QUESTIONS FOR WRITING AND DISCUSSION 1. Decentralization is the delegation of decisionmaking authority to lower levels. In centralized decision making, decisions are made at the very top level, and lowerlevel managers are responsible for implementing these decisions. For decentralized decision making, decisions are made and implemented by lowerlevel managers. 2. Reasons for decentralization include the following: access to local information, more timely response, focusing of central management, exposure of segments to market forces, enhanced petition, training, and motivation. 3. Knowledge of local conditions may be critical for decisions。 that is, what are her prospects for making partner at the public accounting firm? 221 PROBLEMS 10–14 1. Since the Transistor Division can sell all its transistors to the outside petitive market, the minimum transfer price is $. The Systems Division can buy its transistors from the outside market at $, so the maximum transfer price is $. 2. Yes, since the minimum transfer price for the idle capacity is $ ($ less the $ of allocated fixed overhead). The Division is better off if the transfer price is greater than $ for the excess capacity. 3. The negotiated price of $ provides profit for both the Board Division and the Systems Division. The Board Division realizes a profit of $ per board ($ – $). The Systems Division realizes a reduction in cost of $ per board ($ – $). It should be noted that the $ is not a true market price because this particular board is not sold externally. Thus, the Board Division is not necessarily foregoing profit by not selling externally at its regular markup. 10–15 1. Reigis Steel Company