Divisional performance Chapter 20
9
Divisional performance Chapter 20 ME 2027 Performance and Cost Analysis ME 2605 Cost Management and Control (for IMIM) Håkan Kullvén, KTH, 2007 [email protected]
description
Divisional performance Chapter 20. ME 2027 Performance and Cost Analysis ME 2605 Cost Management and Control (for IMIM) Håkan Kullvén, KTH, 2007 [email protected]. Figure 20.1 page 839. A functional organisation. Figure 20.1 page 839. A divisionalized organisation. - PowerPoint PPT Presentation
Transcript of Divisional performance Chapter 20
Divisional performanceChapter 20
ME 2027 Performance and Cost Analysis
ME 2605 Cost Management and Control (for IMIM)
Håkan Kullvén, KTH, 2007
A functional organisation
Figure 20.1 page 839
A divisionalized organisation
Figure 20.1 page 839
&
Improved quality of
decisions
Speedier decisions
Increased
managerial
motivation
Frees top
management time
Sub optimization
Lack of goal
congruence
More costly to
operate
Loss of control by
top management
Reports for divisionsExhibit 20.1 page 844
Return on investment, ROI
•The most widely used model, easy to understand. •But: May motivate for decisions not in line with company ROI•But: May motivate to make incorrect asset disposal decisions
page 845
Residual Income, RI
•More likely to encourage goal congruence
•Can use different % for different investments
•But: Is not that widely used
•Also: EVA, Economic Value Added
page 846
Problem with depreciation
Exhibit 20.2 page 852
Next, we…
Are going to explore how prices
are set for the services and goods
that are transferred from one
internal department to another
one.
Chapter 21
