{"id":1301,"date":"2021-04-30T20:52:59","date_gmt":"2021-04-30T20:52:59","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=1301"},"modified":"2021-06-11T23:25:54","modified_gmt":"2021-06-11T23:25:54","slug":"putting-it-together-responsibility-accounting","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/chapter\/putting-it-together-responsibility-accounting\/","title":{"raw":"Putting It Together: Responsibility Accounting","rendered":"Putting It Together: Responsibility Accounting"},"content":{"raw":"Managing performance can be visualized as a circle encompassing 5 steps:\r\n<ol>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Set performance standards and goals\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Using Key Performance Indicators that align with and promote the organizations larger goals and objectives<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">There are leading and lagging indicators\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">Leading indicators provide information that can be acted upon and that can change results<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">Lagging indicators only show historical results<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Measure performance\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">KPIs should be based on controllable items for each kind of responsibility center\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">For instance, for a revenue center that is based on sales, a KPI could be the number of sales calls made<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">The purchasing department may be held accountable for negotiating the best price and measured against standard costs<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">The production department may be held accountable for cost overruns due to waste measured by standard volumes<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Net income is a lagging indicator of financial performance<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Compare actual performance to established performance standards\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Management communicates KPIs to responsibility centers, departments, and other managers\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">Each KPI should have a benchmark, target, or goal<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Take corrective action\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Managers should be held accountable for the costs and performance measures that they can control\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"3\">For example, the sales manager can control the number of calls made but not the price that competitors are charging<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Use information gained from the process to set up future performance standards\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"2\">Setting KPIs is an iterative process, and should be constantly reviewed for effectiveness.<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ol>\r\n<img class=\"aligncenter\" src=\"https:\/\/lh5.googleusercontent.com\/BOLOvVkoblGAStgt0iLtgTNhqCowunk72j-nugTA6lwqHCZl9mLgWaHMfehjRUIQwcs-_7nI65kS4G5MQAEkNIAvHgyLWp8uwAGCi8RO3GJ1KlZWRs110zw6K6drm8GnanhuEoYB\" \/>\r\n\r\nFinally, here is a quick overview of the concept:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=6352616&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=cwRSOKUx4rI&amp;video_target=tpm-plugin-c73kjz7q-cwRSOKUx4rI\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/ResponsibilityAccounting_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Responsibility Accounting\" here (opens in new window)<\/a>.\r\n\r\nOr a longer overview here:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=6352617&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LdR2yOal5YA&amp;video_target=tpm-plugin-2tlkzhqq-LdR2yOal5YA\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/PerformanceEvaluationAndResponsibilityCenters_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Performance Evaluation and Responsibility Centers\" here (opens in new window)<\/a>.","rendered":"<p>Managing performance can be visualized as a circle encompassing 5 steps:<\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Set performance standards and goals\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Using Key Performance Indicators that align with and promote the organizations larger goals and objectives<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\">There are leading and lagging indicators\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\">Leading indicators provide information that can be acted upon and that can change results<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"3\">Lagging indicators only show historical results<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Measure performance\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">KPIs should be based on controllable items for each kind of responsibility center\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\">For instance, for a revenue center that is based on sales, a KPI could be the number of sales calls made<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"3\">The purchasing department may be held accountable for negotiating the best price and measured against standard costs<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"3\">The production department may be held accountable for cost overruns due to waste measured by standard volumes<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Net income is a lagging indicator of financial performance<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Compare actual performance to established performance standards\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Management communicates KPIs to responsibility centers, departments, and other managers\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\">Each KPI should have a benchmark, target, or goal<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Take corrective action\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Managers should be held accountable for the costs and performance measures that they can control\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"3\">For example, the sales manager can control the number of calls made but not the price that competitors are charging<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Use information gained from the process to set up future performance standards\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\">Setting KPIs is an iterative process, and should be constantly reviewed for effectiveness.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh5.googleusercontent.com\/BOLOvVkoblGAStgt0iLtgTNhqCowunk72j-nugTA6lwqHCZl9mLgWaHMfehjRUIQwcs-_7nI65kS4G5MQAEkNIAvHgyLWp8uwAGCi8RO3GJ1KlZWRs110zw6K6drm8GnanhuEoYB\" alt=\"image\" \/><\/p>\n<p>Finally, here is a quick overview of the concept:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=6352616&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=cwRSOKUx4rI&amp;video_target=tpm-plugin-c73kjz7q-cwRSOKUx4rI\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/ResponsibilityAccounting_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Responsibility Accounting&#8221; here (opens in new window)<\/a>.<\/p>\n<p>Or a longer overview here:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=6352617&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=LdR2yOal5YA&amp;video_target=tpm-plugin-2tlkzhqq-LdR2yOal5YA\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3.us-west-2.amazonaws.com\/Managerial+Accounting\/Transcripts\/PerformanceEvaluationAndResponsibilityCenters_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Performance Evaluation and Responsibility Centers&#8221; here (opens in new window)<\/a>.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-1301\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Putting It Together: Responsibility Accounting. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Responsibility Accounting. <strong>Provided by<\/strong>: Edspira. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/cwRSOKUx4rI\">https:\/\/youtu.be\/cwRSOKUx4rI<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><li>Performance Evaluation and Responsibility Centers. <strong>Authored by<\/strong>: Professor Coram. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/LdR2yOal5YA\">https:\/\/youtu.be\/LdR2yOal5YA<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":15,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Putting It Together: Responsibility Accounting\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Responsibility Accounting\",\"author\":\"\",\"organization\":\"Edspira\",\"url\":\"https:\/\/youtu.be\/cwRSOKUx4rI\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"copyrighted_video\",\"description\":\"Performance Evaluation and Responsibility Centers\",\"author\":\"Professor Coram\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/LdR2yOal5YA\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-1301","chapter","type-chapter","status-publish","hentry"],"part":39,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/1301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":4,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/1301\/revisions"}],"predecessor-version":[{"id":2248,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/1301\/revisions\/2248"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/39"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/1301\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/media?parent=1301"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=1301"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=1301"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/license?post=1301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}