Management accounting -- Chapter 9

Management control system -- a logical integration of techniques for gathering and using information to make planting and control decisions, for motivating employee behavior, and for evaluating performance
Key success factor -- characteristic or attributes that managers must achieve in order to drive the organization toward its goals
responsibility Center -- a set of activities and resources assigned to a manager, a group of managers, or other employees
responsibility accounting -- identifying what parts of the organization have primary responsibility for each action, developing performance measures and targets, and designing reports of these measures by responsibility Center
cost center -- a responsibility Center in which managers are responsible for costs only
profit center -- a responsibility Center in which managers are responsible for revenues as well as costs (or expenses) -- that is, profitability
investment center -- a responsibility Center is success depends on both income and invested capital, perhaps measured by a ratio of income to the value of the capital employed
goal congruence -- a condition where employees, working in their own personal interests, make decisions that help meet the overall goals of the organization
managerial effort -- exertion toward a goal or objective including all conscious actions (such as supervising, planning, and thinking) that result in more efficiency and effectiveness
motivation -- the drive for some selected goal that creates effort and action toward that goal
uncontrollable cost -- any cost that the management of a responsibility Center cannot affect within a given time span
controllable cost -- any cost that a managers decisions and actions can influence
segments -- responsibility centers for which a company develops separate measures of revenue and costs
balanced scorecard -- a performance measurement and reporting system that strikes a balance between financial and operating measures, links performance to rewards, and gives explicit recognition to the diversity of organizational goals
Key performance indicators -- measures that drive the organization to achieve its goals
quality control -- the effort to ensure that products and services performed to customer requirements
cost of quality report -- a report that displays the financial impact of quality
total quality Management (TQM) -- an approach to quality that focuses on prevention of defects and on customer satisfaction
quality control chart -- the statistical plot of measures of various product dimensions or attributes
six Sigma -- an analytical method aimed at achieving near-perfect results on a production line
cycle time (throughput time) -- the time taken to complete a product or service, or any of the components of a product or service
productivity -- a measure of outputs divided by inputs

The starting point for designing and evaluating a management control system is the identification of organizational goals as specified by top management.
Responsibility accounting assigns particular revenue or cost objectives to the management of the subunit that has the greatest influence over them. Cost centers focus on costs only, profit centers on both revenues and costs, and investment centers on profits relative to the amount invested.
A well-designed management control system measures both financial and nonfinancial performance. In fact, nonfinancial performance usually leads to financial performance in time. The performance measures should tell managers how well they are meeting the organization's goals.
The way an organization measures and evaluates performance affects individual's behavior. The more that it ties rewards to performance measures, the more incentive there is to improve the measures. Poorly designed measures may actually work against the organization's goals.
The contribution approach to measuring a segments income aids performance evaluation by separating a segments costs into this controllable by the segment management and those beyond management's control. It allows separate evaluation of a segment as an economic investment in the performance of the segments manager.
The balanced scorecard helps managers monitor actions that are designed to meet the various goals of the organization. It contains key performance indicators that measure how well the organization is meeting its goals.
Measuring performance in areas such as quality, cycle time, and productivity causes employees to direct attention to those areas. Achieving goals in these nonfinancial measures can help meet long-run financial objectives.
Management control in service and nonprofit organizations is difficult because of a number of factors, chief of which is a relative lack of clearly observable outcomes.