Braun & Tietz Managerial Accounting: Chapter 10

Balanced scorecardA performance evaluation system that integrates financial and operational performance measures along four perspectives: financial, customer, internal business, and learning and growth
Capital turnoverSales revenue divided by total assets and shows how much sales revenue is generated with every $1 of assets
Common fixed expensesFixed expenses that cannot be traced to the segment
Cost centerA responsibility center in which managers are responsible for controlling costs
DecentralizeA process where companies split their operations into different operating segments
Direct fixed expensesFixed expenses that can be traced to the segment
Favorable varianceA variance that causes operating income to be higher than budgeted
Flexible budgetA summarized budget prepared for different levels of volume
Flexible budget varianceThe difference between the flexible budget and actual results with variances due to something other than volume
Goal congruenceWhen the goals of the segment managers align with the goals of top management
Gross book valueHistorical cost of assets
Investment centerA responsibility center in which managers are responsible for generating revenues, controlling costs, and efficiently managing the division’s assets
Key performance indicatorsSummary performance metrics used to assess how well a company is achieving its goals
Lag indicatorsPerformance indicators that reveal the results of past actions and decisions
Lead indicatorsPerformance measures that predict future performance
Management by exceptionA management technique in which managers only investigate budget variances that are relatively large
Master budget varianceThe difference between actual results and the master budget
Net book valueHistorical cost of assets less accumulated depreciation
Performance reportsReports that compare actual results against budgeted figures
Performance scorecard or dashboardA report displaying the measurement of KPIs, as well as their short term and long term targets
Profit centerA responsibility center in which managers are responsible for both revenues and costs, and therefore profits
Residual incomeOperating income minus the minimum acceptable operating income given the size of the division’s assets
Responsibility accountingA system for evaluating the performance of each responsibility center and its managers
Responsibility centerA part of an organization whose manager is accountable for planning and controlling certain activities
Return on investment (ROI)Operating income divided by total assets that measures the profitability of a division relative to the size of its assets
Revenue centerA responsibility center in which managers are responsible for generating revenue
Sales marginOperating income divided by sales revenue that shows how much income is generated for every $1 of sales
Segment marginThe operating income generated by a profit or investment center before subtracting the common fixed costs that have been allocated to the center
Transfer priceThe price charged for the internal sale of product between two different divisions of the same company
Unfavorable varianceA variance that causes operating income to be lower than budgeted
VarianceThe difference between an actual amount and the budgeted amount
Vertical integrationThe acquisition of companies within one’s supply chain
Volume varianceThe difference between the master budget and the flexible budget. The volume variance arises only because the actual volume differs from the volume originally anticipated in the master budget