Learning Objectives
                       Lead C1: Analyse the performance of responsibility centres and prepare reports
                       Component C1): 
                       a)   Analyse the performance of cost centres, revenue centres, profit centres & investment 
                            centres
                       b)   Prepare reports for decision-making
                           •  Objectives of each responsibility centre.
                           •  Controllable and uncontrollable costs and revenue.
                           •  Costs variability, attributable costs and revenue and identification of appropriate measures of performance.
                           •  Use of Data analytics in performance management of responsibility centres.
                           •  Key Performance indicators (e.g. profitability, liquidity, asset turnover, return on investment and economic 
                              value
               Session Content
                               Cost Centres, Profit Centres 
                               Cost Centres, Profit Centres 
                                 and Investment Centres
                                 and Investment Centres
               Organisation      Residual                      Behavioural
                Organisation      Residual        ROI          Behavioural
                 Structure        Income           ROI            Issues
                 Structure        Income                           Issues
                               Decentralization/ 
                               Divisionalisation
                              Decentralisation seeks to overcome the problem of managing a large organisation 
                              by creating a structure based on several autonomous decision-making units.
                              Objective
                              1.   Promote goal congruence
                              2.   Increase motivation of management
                              3.   Reduce head office bureaucracy
                              4.   Provide better training for junior and middle management
                              Problems
                              Divisions make decisions in their own best interests, but which are not good from the company point of view. The 
                              problem is overcome by introducing a suitable system of performance evaluation.
                                  Objectives of Performance Evaluation
                                1.    Promote goal congruence
                                2.    Encourage initiative and motivation
                                3.    Provide feedback to management
                                4.    Encourage long-term rather than short-term views
                                These objectives can only be achieved with the  introduction of responsibility centres.
                                - Cost Centres
                                - Profit Centres
                                - Investment Centres
                                In responsibility accounting, a specific manager is given the responsibility for a particular aspect of the budget, and within the 
                                budgetary control system, he or she is then made accountable for actual performance.
            Objectives of Performance Evaluation
          In responsibility accounting, a specific manager is given the responsibility for a particular aspect of the budget, and 
          within the budgetary control system, he or she is then made accountable for actual performance.
          The area of operations for which a manager is responsible is called a responsibility centre.
          Each cost centre, profit centre and investment centre should have its own budget, and its manager should receive 
          regular budgetary control information relating to the centre, for control and performance measurement purposes.
          If the principle of controllability is applied, a manager should be made responsible and accountable only for the 
          costs (and revenues) that he or she is in a position to control.