Page 132 - APM Integrated Workbook STUDENT S18-J19
P. 132

Chapter 9




                           Structuring divisions as responsibility

                           centres




                             There are three ways to structure a division:



               1 Cost centre – division       2 Profit centre – division     3 Investment centre –
                  incurs costs but has no        has both costs and             division has both costs
                  revenue streams.               revenues.                      and revenues but in
                                                                                addition has authority to
                                                                                make investment
                                                                                decisions.

                             Performance measures:



                cost ratios and               profit margins and all       as for profit centre plus:
                  variances                      variances
                                                                              return on investment
                non-financial measures,   non-financial measures,             (ROI)
                  e.g. based on                  e.g. based on customer       residual income (RI)
                  productivity.                  satisfaction.
                                                                              economic value added
                                                                                (EVA).

                                                                             (Will focus on these in this
                                                                             chapter).






























               122
   127   128   129   130   131   132   133   134   135   136   137