Pertemuan 4
Pusat Tanggung Jawab: Pusat
Pendapatan dan Beban
Sigit Sanjaya, SE, MM
Responsibility Centers
A responsibility centre is an organization unit that is headed
by a manager who is responsible for its activities.
In a sense company is a collection of responsibility centers,
each of which is represented by a box on the organization
chart.
A responsibility center exists to accomplish the objectives of
the organization as the organization got its own goals and
objectives.
As each organization is sum of the responsibility centers and
if all the centers achieve their goals and objectives the
overall organizational goals and objectives will be achieved.
Types of Responsibility Centers
There are four types of responsibility centers, classified
according to the nature of the monetary inputs and /or
output.
They are; Revenue center, expense center, profit center
and investment center.
In revenue center output is measured in monetary terms,
in expense center input is measured in monetary terms,
in profit center both revenue (output) and expense
(input) are measured and in investment center the
relationship between profit and investment is measured.
Each and every responsibility centers required different
type of planning and control system.
EFFECTIVENESS AND EFFICIENCY
Effectiveness: It means how well the responsibility
center does its job- that is, the extent to which it
produces the intended or expected results.
Efficiency: It is used in its engineering sense – that is,
the amount of output per unit of input.
A responsibility center must both be efficient and
effective.
Revenue Center
In a revenue center output is measured in monetary
terms, but no formal attempt is made to relate input to
output.
Generally, revenue centers are marketing/sales units that
do not have authority to set selling prices and do not
charged for the cost of the goods they sell.
Actual sales or orders booked are measured against the
budgets and quotas, and the manager is held responsible
for the expenses incurred directly within the unit.
The primary measurement is revenue in this center.
Expense Center
Expense centers are responsibility centers whose inputs
are measured in monetary terms, but whose outputs are
not.
There are two general types of expense centers;
engineered and discretionary.
Engineered costs are those for which the right and
proper amount can be estimated with reasonable
reliability – direct costs.
Discretionary costs are those for which no engineered
estimate is feasible – support activities
Engineered Costs
Here, the inputs can be measured in monetary terms,
because the engineered cost centre is basically found in
manufacturing operations.
In engineered cost center output multiplied by the
standard cost of each unit gives the finished product
cost, means the output can be measured in the physical
terms.
The optimum amount of input required to produce one
unit of output can also be measured in this center.
The engineered cost center not only measure the cost
but it is also responsible for the quality of the products,
volume of the production as well as efficiency.
Discretionary Expense Center
This center include administrative and support units –
accounting, legal, human resources – research and
development and most marketing activities.
This center shows the top management policies and
decisions for different departments to improve overall
efficiency and profitability of the organization and
appropriate amount to be spent on financial planning,
R&D, public relations etc.
In discretionary cost center the budgets are given to
improve the working of different departments but there
are no variance analysis for this budgets, only control
systems are implemented.
MCS for Discretionary Cost Center
Budget Preparation: management formulates the budget
here by determining the magnitude of the job that needs
to be done, and not the volumes of the output.
The work done here falls into two general categories:
continuing and special.
Continuing work is done consistently from year to year,
such as preparation of financial statements.
While, special work is a one shot project – developing and
installing a system in new acquired division.
The technique used in this budgeting is management by
objectives and a formal process in the department ask for
the budget on the basis to accomplish the specific jobs and
activities.
Contd.
The planning function of this center is carried out in one of
the two ways: incremental budgeting and zero-base.
In the Incremental budgeting, the discretionary expense
center’s current level of expenditure is taken as a starting
point. This amount is adjusted for inflation, changes in the
workload of job.
Incremental budgeting has two drawbacks: first,
discretionary expense center’s current expenses are taken
as it is and not reexamined during the budget preparation
process.
From the current level the managers always want to
increase the services so they will demand extra budget
every time.
Contd.
Zero-base review: an alternative budgeting approach is
to make a thorough analysis of each discretionary
expense center on a rolling basis, so that all are reviewed
once and then the budgets are finalized.
In contrast with incremental budgeting this review starts
from scratch so the resources actually required are only
given to the activity.
Cost Variability: unlike the engineered cost which are
strongly affected by short run volume changes, cost in
discretionary centers, it reacts to short term fluctuations
in jobs and other activities.
Contd.
Type of financial control: in case of engineered cost center
the objective is to become cost competitive by setting a
standard and measuring actual cost against the standard.
While, in discretionary cost center the controlling of cost in
the planning phase itself before incurring the cost.
Measurement of Performance: the engineered cost center is
having the output and the volume as a measurement but in
case of discretionary cost center the manager has to obtain
the desired output in terms of planning.
Now, we will be studying different centers and the MCS to
implemented in that.
Administrative & Support Centers
Administrative centers include senior management and
business unit management, along with the managers of
supporting staff units.
Support center units that provide services to other
responsibility centers.
Control Problems:
Difficulty in measuring output
Lack of goal congruence
Budget Preparation
Research and Development Center
Control Problems:
Difficulty in relating results to inputs
Lack of goal congruence
The R&D Range: the activities conducted by R&D has
long range, as it starts from basic research on one
extreme and product testing at the other range.
The R&D Program: there is no scientific way to
determine the optimum size of an R&D budget.
Program list budget plus the blanket allowance for
unplanned work.
Measurement of Performance
Marketing Center
Generally, in all the companies two different types of
activities are grouped under the heading of marketing
that is logistics activities and marketing activities.
Logistics activities: logistics activities are those involved
in moving goods from the company to its customers and
collecting the the amounts due form customers in return.
Marketing activities are those undertaken to obtain
orders for company products. These activities include
test marketing, training, supervision of sales force,
advertising, sales promotion.
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