QUESTIONS IN PREPARATION FOR THE SESSION See below Be prepared to discuss the following questions: 1. Explain what is meant by "responsibility accounting"?2. What does it mean when an organization is decentralized?3. What are the advantages of decentralization?4. What are 2 disadvantages and how do you think they can be overcome?5. Differentiate between a cost center, a profit center and an investment center. 6. What types of performance measures would be appropriate for evaluating:a) a cost centerb) a revenue centerc) a profit centerd) an investment center While reviewing the problems, we will address discussion questions 7-12 below: 7. Explain the term "return on investment" (ROI). What does it indicate? How does using the return on investment facilitate comparability between divisions of decentralized operations? 8. What are 2 advantages and 2 disadvantages of using ROI to evaluate performance? 9. In a decentralized company where the divisions are organized as investment centers, how could a division be considered the least profitable even though it earned the largest amount of income from operations? 10. What is the "DuPont formula" for determining ROI? (Hint: your book describes it on the bottom of page 528, or, look it up on Internet,) What does it tell us and how is it helpful in interpreting the return on investment for a decentralized operation? 11. What's residual income? Why is it useful? What are the advantages and disadvantages of using this method for evaluating divisional performance? 12. What is the major shortcoming of using income from operations that is directly reported by a division, as a performance measure for an investment center? What other measure do you think we should use? In other words, how do you think the number reported by a division needs to be adjusted in order to be truly useful for evaluating their performance

QUESTIONS IN PREPARATION FOR THE SESSION See below 1. Explain what is meant by \"responsibility accounting\"? 2. What does it mean when an organization is decentralized? 3. What are the advantages of decentralization? 4. What are 2 disadvantages and how do you think they can be overcome? 5. Differentiate between a cost center, a profit center and an investment center. 6. What types of performance measures would be appropriate for evaluating: a) a cost center b) a revenue center c) a profit center (1) an investment center While reviewing the problems, we will address discussion questions 7-12 below: 7'. Explain the term \"return on investment\" (ROI). What does it indicate? How does using the return on investment facilitate comparability between divisions of decentralized operations? 8. What are 2 advantages and 2 disadvantages of using ROI to evaluate performance? 9. In a decentralized company where the divisions are organized as investment centers, how could a division be considered the least profitable even though it earned the largest amount of income from operations? 10. What is the \"DuPont formula\" for determining ROI? (Hint: your book describes it on the bottom of page 528, or, look it up on Internet,) What does it tell us and how is it helpful in interpreting the return on investment for a decentralized operation? 11. What's residual income? Why is it useful? What are the advantages and disadvantages of using this method for evaluating divisional performance