RESPONSIBILITY CENTER: CENTER OF INCOME AND EXPENSES

RESPONSIBILITY CENTER: CENTER OF INCOME AND EXPENSES
Responsibility center is an organization that is led by a manager who is responsible for the activity undertaken. In essence, the company is a collection of centers of responsibility, which is represented by a box on the organizational chart. Responsibility centers then form a hierarchy.

The nature of accountability Answer Center
Center appeared to realize the responsibility of one or more purposes (goals). In this case a company's senior management to determine a number of strategies to achieve goals. Center works to implement the responsibility of the strategy. The ideals of the organization have been achieved if each responsibility center has accomplished his goal.
Picture of how the responsibilities of each center are as follows:

Input Output

Goods of resources or services
used,
measured from
costs
Capital

Responsibility center receives input in the form of: raw materials, labor and services. By using capital for working capital, equipment and other assets, the central responsibility of carrying out certain functions, with the ultimate goal to change inputs into outputs.


Relations between Input and Output

Management is responsible for ensuring the optimal relationship between inputs and outputs. Disejumlah responsibility centers, the relationship between inputs and outputs are reciprocal and direct.
For example: in the production department, in the form of input raw materials become part of finished goods.
Control here focused on the use of minimum inputs required to produce the required output according to specifications and quality standards are correct, timely, and in accordance with the amount requested.

Measuring Input and Output

How to measure the input:
Most of the inputs used by the central responsibility can be expressed in physical measures of work-hours, liters of oil, reams of paper, and kwh of electricity.
In the management control system, the units of quantity are then translated into monetary terms; money is the common denominator that allows the value and variety of diverse resources to be combined and combined.
Value for money from a particular input is usually calculated by multiplying the physical quantity at a price per unit (ie, number of hours worked multiplied by hourly rate).


Monetary amount generated from these calculations are referred to as the "cost". Cost is a monetary measure of the amount of resources used by a central responsibility.
Measuring output is not as easy to measure inputs.
Example: income per year is an important measure of the output of an organization oriented to profit, but does not describe the entire organization's performance during the year.
In a non-profit organizations, perhaps there is no benchmark for a quantitative output. There are some that use an estimate or use substitute numbers (surrogate numbers), but know the limitations of the estimate or replacement numbers are.

Efficiency and Effectiveness
The concept of input, output, and the cost can be used to explain the meaning of efficiency and effectiveness, which are two criteria by which the performance of responsibility centers assessed. The second term is almost always used in a comparison and not in an absolute sense.
Efficiency is the ratio of output to input, or the amount of output per unit of input.
A Responsibility Center is more efficient than accountability Answer Center:
1) if the use amount of resources fewer than the Responsibility Center B, but produce the same amount of output, or
2) use of resources but produce the same amount of output is greater.
The first criterion does not require that the output dikuantitatifkan; but is necessary to assess the output and the second is almost the same unit. Assuming that the central responsibility to satisfactorily carry out the work and the size of each job can be compared, then the units with lower inputs (ie, lower cost) is more efficient.
In the second criterion where the input is the same but with different outputs, then the required number of quantitative measures of output; so is a more difficult calculation.
Effectiveness is determined by the relationship between the output produced by a central responsibility of destination.
The greater the output contributed to the goal, the more efektiflah unit. Effectiveness tends expressed in terms of subjective and nonanalitis-like, "Performance Campus A is the best, but campus B has somewhat decreased in recent years.
Efficiency and effectiveness related to each other; each responsibility center should be effective and efficient. in short, a major responsibility will be efficient if done the right thing, and will be effective when doing things right.

Role Profit
The main purpose of profit-oriented company is to obtain a satisfactory profit. Since profit is the difference between income (output size) and cost (input size), then the profit is a measure of efficiency.
Profit is also an important measure of effectiveness. Thus, the profit is used as a measure of efficiency and effectiveness of profit-oriented companies.

Types of Responsibility Center
There are 4 types of responsibility centers, classified according to the nature of input and / or monetary output was measured for control purposes: revenue center, load centers, profit centers and investment centers.
Revenue Center
At the center of income, an output (ie, income) measured monetarily, but there is no formal effort made to connect the input (ie, the burden or cost) with the output. (If the burden associated with income, then the unit will become a profit center).
In general, income is the central unit of marketing / sales that did not have the authority to set the selling price and is not responsible for the cost of goods sold from the goods they are marketed. Actual sales or orders measured against budgets and quotas, and managers are considered responsible for the burden that occurs directly in the unit, but the main measure is income.
Load Center
Load center is the central responsibility of the input measured monetarily, but the output is not.
There are two common types of load centers:
1. Load Center engineering
2. Load Center policy
Two load center is associated with two types of fees:
1. Engineering costs, ie costs which amount properly and adequately be estimated with reasonable reliability. Examples: factory costs for direct labor, direct materials, components, equipment, and necessities.
2. Policy costs (the cost of managed) are not available cost estimation technique. In the center of policy burdens, the costs incurred depending on management assessment of sufficient numbers in certain circumstances.
Burden Center for Engineering
The Center has the characteristics:
1. input-input can be measured in monetary
2. input-input can be measured physically
3. optimum amount of dollars and inputs required to produce one unit of output can be determined.
Load center techniques usually found in manufacturing operations. Warehousing, distribution, shipping by truck, and similar units in the marketing organization biases classified into the load center techniques.
Load Center Technical Chart

Relationship Example
optimal
be determined

Input Output Work Function
(dollars) (physical) Manufacturing

Burden Center for Policy
Load Center policy units include administrative and support (such as accounting, law, industrial relations, public relations, human resources), R & D operations, and almost all activities of the center pemasaran.Output these costs can not be measured monetarily.
In a major policy burden, the difference between budget and actual costs is not a measure of efficiency. This is only a difference between the budgeted input and actual input and does not include the value of output.
Load Center Exhibit Policy

Relationships
not optimal
be determined

Input Output Work Function
(dollars) (physical) research
and
development

Research and development activities usually have a half-tangible results in the form of patents, new products or new processes.
There is no scientific way to determine the optimum scale of research and development budget. Companies simply use a percentage of average income as a basis.
Performance measurement R & D activities, the information through progress reports (progress reports), and became the basis for management to make judgments about the effectiveness of the project.



Revenue Center Exhibit
Input not
related
with output

Input Output Work Function
(dollars only for the (dollar marketing
costs Revenue)
Direct)

There are two types of activities under the marketing center, which control different from one another:
1. Activity logistics / order fulfillment / logistics order
The activities include: transportation to distribution centers, warehousing, shipping and delivery, submission of accounts and activities related to credit and billing functions of accounts receivable.
Responsibility centers that perform these functions are fundamentally similar to the load centers in the plant. To reflect the costs at various volume levels can be controlled through the application of standards and adjust your budget. For example: work documents covering the activities of logistics and billing accounts receivable can be completed quickly and at low cost through the Internet.
2. Marketing activities / search order
The activities include test marketing; formation, training, and supervision of sales personnel (sales force); advertising, and promotion penjualan.Untuk evaluate the effectiveness of marketing activities more difficult. Because it is unknown how exactly the optimal amount to be issued, then the search costs orders can not be measured from the target cost, but based on sales targets.


Profit Center Exhibit
Input not
related
with output

Business Unit Input Output
(dollars (dollars
costs) profit)

Investment Center Exhibit
Input
related
capital
used

Input Output Capital business unit
(dollars are used (dollars
costs) profit)


The following management control system to load centers in general policy.
The characteristics of general control:
- Preparation of Budget
Management made the decision to the central budget burdens separate policy from the load center techniques. Furthermore, management determines whether a proposed operating budget to reflect the cost per unit of execution of tasks efficiently. In essence, the management burden of the central budget to formulate a policy to determine the amount of work to be done.

- Variation Fee
In making budget policy for the load center, the managers tend to agree with the changes associated with changes in the anticipated sales volume. For example, let add labor if sales volume went up, and to reduce the workforce if sales volumes are declining.
- Types of Financial Control
Financial control in the load center is the policy aims to control costs by including the managers to participate in the planning, discuss what steps taken, and what level of effort appropriate to each. So, in the load center policy, financial control became the main thing discussed at the planning stage before the costs occurred.
- Performance Measurement
Load center managers have the primary job policies to achieve output of a number of diinginkan.Membelanjakan "on budget" this is considered satisfactory; amount in excess of the budget is cause for concern, while significantly less than the budget indicates that the planned work was not finished implemented.
In the center of policy burdens, the financial statements is not a tool for evaluating the efficiency of a manager....