Decentralized Performance Evaluation Examples

The calculations below use the current live scenario and update when a new scenario is generated.

This dashboard contains one randomized decentralized performance evaluation scenario. The values feed the worked examples below.

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Concept Summary: Decentralization gives local managers decision authority. Performance evaluation should preserve local speed while keeping decisions aligned with company-wide goals.

Example A: Classify the decision authority

Objective: Decide whether a decision should remain local or move to corporate review.

Example B: Identify goal congruence risk

Objective: Compare the division manager's incentive with total company performance.

Concept Summary: Responsibility accounting evaluates managers based on the revenues, costs, profits, and investments they can influence.

Example A: Classify responsibility centers

Objective: Match the center type to the manager's authority.

Example B: Compute segment margin

Objective: Separate contribution margin, direct fixed costs, and common fixed costs.

Example C: Apply controllability principle

Objective: Determine which amounts belong in the manager's performance report.

Concept Summary: A balanced scorecard connects financial outcomes with customer, internal process, and learning measures that drive future performance.

Example A: Build a cause-and-effect chain

Objective: Link learning, process, customer, and financial measures.

Example B: Interpret a mixed scorecard result

Objective: Decide what to investigate when financial and nonfinancial results point in different directions.

Concept Summary: ROI evaluates an investment center by comparing income with the operating assets used to earn it.

Example A: Calculate ROI directly

Example B: Decompose ROI using DuPont logic

Example C: Solve missing income needed for target ROI

Concept Summary: Residual income measures dollar income earned above the required return on operating assets.

Example A: Compute required return and residual income

Example B: Evaluate an added investment using ROI and residual income

Objective: Show why a manager might reject a project that improves total company value when evaluated only on ROI.

Concept Summary: Transfer pricing affects the selling division, buying division, and total company. A useful transfer price encourages the divisions to make decisions that are also good for the organization.

Example A: Determine the acceptable transfer-price range

Example B: Compare variable cost, full cost, market, and negotiated transfer prices

Example C: Make the transfer-pricing decision