Management and Cost Accounting Week 11 Assignment Solution

This document presents a comprehensive solution to a management and cost accounting assignment, focusing on the concepts of cost centers, profit centers, and centralized departments. The assignment analyzes a scenario involving Clearview Ltd., evaluating the performance of its Glass, Wood, and Metal departments. The solution addresses the classification of these departments, the implications of centralized decision-making, and the potential transformation into profit centers. Furthermore, the document explores the impact of decentralization on departmental structures and provides recommendations for upper management regarding performance evaluation. The solution utilizes key accounting principles and references relevant literature to support its analysis and recommendations, offering valuable insights into the complexities of managerial accounting.

Running head: MANAGEMENT AND COST ACCOUNTING WEEK 11
MANAGEMENT AND COST ACCOUNTING WEEK 11:
Name of the Student:
Name of the University:
Author note:

1MANAGEMENT AND COST ACCOUNTING WEEK 11
Table of Contents
Answer to Question 19.17:..................................................................................................................2
Requirement 1:.................................................................................................................................2
Requirement 2:.................................................................................................................................2
Requirement 3:.................................................................................................................................2
Requirement 4:.................................................................................................................................2
Requirement 4.a:..........................................................................................................................2
Requirement 4.b:..........................................................................................................................3
Reference.............................................................................................................................................4

2MANAGEMENT AND COST ACCOUNTING WEEK 11
Answer to Question 19.17:
Requirement 1:
The all three departments of Clearview Ltd. are cost centres, because they are evaluated on
the basis of their output and variances from the expected costs (Braun et al. 2014).
Requirement 2:
The all three departments of Clearview Ltd., namely Glass, Wood and Metal department are
centralised department, because all the decision making and preparation of production schedules
are done by the upper management (Chopra and GAURI 2015).
Requirement 3:
A centralised department can be a profit centre, because the concept of centralisation
includes the department has autonomous decision making authority, regardless of the type of
responsibility centre used to evaluate the performance of the department (Braun et al. 2014). For
example, if the upper management decides and sets a transfer price for the transferred glass, then
glass department would be considered to be a profit centre.
Requirement 4:
Requirement 4.a:
The condition mentioned, will make a change as the departments will no longer be a
centralised, as each departments will individually have more of the local decision making authority,
such as setting its own production schedule (Chopra and GAURI 2015).
As a result of these changes, all the three departments will be profit centres, as the managers
of the departments will be responsible for both, revenues and costs (Braun et al. 2014).
Requirement 4.b:
The upper management will be recommended to evaluate all the three departments as profit
centers. The upper management should do this, because profits would be a good indicator to

3MANAGEMENT AND COST ACCOUNTING WEEK 11
measure the performance of each department and their ability to generate revenue (Braun et al.
2014).

4MANAGEMENT AND COST ACCOUNTING WEEK 11
Reference
Braun, K.W., Tietz, W.M., Harrison, W.T., Bamber, L.S. and Horngren, C.T., 2014. Managerial
accounting. Boston: Pearson.
Chopra, R.K. and GAURI, P., 2015. Office Management.