1. 9.1 What is a management control system? What are its components and how does the system help the
business?
2. 9.1 Identify and describe the levels of management, including the various types of decisions managers at
each level make.
3. 9.1 Discuss the difference between centralized and decentralized organizations. Does the size of the
organization influence whether the organization has a centralized or decentralized structure? Explain.
4. 9.1 Identify a company where you recently shopped. Assume the company operates with a decentralized
structure. Describe how customers might benefit from the decentralized structure.
5. 9.1 Discuss the difference between daily and strategic decisions. Think of a business and provide an
example of a daily and strategic decision.
6. 9.1 Access PepsiCo’s 2017 annual report (https://openstax.org/l/50Pepsi2017) . Starting at the top of the
document, use the find (Ctrl + F) or search feature in the browser to search the annual report for the word
“segments” to determine how many operating segments PepsiCo has. What are the segments? How are the
segments categorized?
7. 9.1 Another search of PepsiCo’s 2017 annual report (https://openstax.org/l/50 Pepsi2017) reveals the
company maintains a centralized management perspective on aspects of these items:
• Commodities (items such as sugar and high fructose corn syrup that go into many of the beverages)
• Research and development
• Insurance and benefit program
• Foreign currency transactions
• Debt, investments, and other financing activities
Explain why these activities would be centralized functions within PepsiCo as opposed to decentralized like
many other activities.
8. 9.2 Define segments and describe how identifying segments within a business might help manage the
business.
9. 9.2 Choose a company and describe how a specific issue, policy, or procedure (for example, granting
merchandise returns, establishing sales prices) might look if the business is structured as a centralized
business.
10. 9.2 Choose a company and explain how a specific issue, policy, or procedure (for example, granting
merchandise returns, establishing sales prices) might look if the business is structured as a decentralized
business.
11. 9.2 Assume you are the manager of a local Starbucks. What factors do you feel would be relevant to
hiring workers (including pay), assuming Starbucks is a decentralized organization?
12. 9.2 Assume you are the manager of a local Starbucks. What factors do you feel would be relevant to
hiring workers (including pay), assuming Starbucks is a centralized organization?
Chapter 9 Responsibility Accounting and Decentralization 495
13. 9.2 Use Netflix’s 2017 annual report (https://openstax.org/l/50Netflix2017) to answer the following
questions. How many segments does Netflix have? What are the segments? The annual report also shows
selected nonfinancial and financial information for each segment. Prepare a brief presentation listing the
“Paid memberships at end of period,” “Revenues,” and “Contribution profit” (also called operating profit) for
the three most recent years (2017, 2016, and 2015). In the presentation, include any observations you notice
about the trends of each segment.
14. 9.2 Reference the Kellogg Company’s 2017 annual report (https://openstax.org/l/50Kellogg2017) to
answer the following question. In “Note 18: Reportable Segments,” you will find selected financial information
for segments within Kellogg Company. Prepare a brief presentation listing each segment, along with the “Net
Sales,” “Operating Profit,” and “Total Assets.” For Total Assets, you should ignore Corporate and Elimination
entries, and you will need to combine the U.S. divisions into a North American total. Report this information for
the three most recent years (2017, 2016, and 2015). In the presentation, include any observations you notice
about the trends of each segment. You may want to use Microsoft Excel or another spreadsheet application
for the numerical data. This information will be used in a subsequent question.
15. 9.2 Lavell started out mowing lawns in the neighborhood when he was 13 years old. He did such good
work that, without advertising, his business grew steadily each year. After college, Lavell decided to continue
the business as a full-time career. One of his concerns, however, is the number of hours he is putting in. Once
school lets out, he finds himself working long hours nearly every day of the week. Although he has added
workers, his business now handles mowing, trimming, and landscaping for residential, corporate, and
nonprofit clients. He is considering adding managers but is not quite sure how to structure the organization.
Lavell wants to focus on building the business rather than doing the daily work, so he knows a decentralized
structure will be best. He has asked you to develop a potential organizational chart to help him envision the
best way to organize the business. Describe the advantages to this approach as well as any concerns he
should have.
16. 9.3 Describe the concept of responsibility accounting.
17. 9.3 Describe the concept of a cost center and, using a specific organization, give an example of how this
might be used to achieve the strategic goals of the organization.
18. 9.3 Describe the concept of a profit center and, using a specific organization, give an example of how
this might be used to achieve the strategic goals of the organization.
19. 9.3 Explain the benefits of a return on investment structure within an investment center framework. It
may help to think of an example using an existing company.
20. 9.3 Explain the benefits of a residual income structure within an investment center framework. It may
help to think of an example using an existing company.
21. 9.4 Discuss the concept of controllable and uncontrollable costs and how they affect the evaluation of
the responsibility center’s financial performance.
22. 9.4 Discuss the concept of transfer pricing.
23. 9.4 Discuss the advantages and disadvantages of a market-based transfer pricing approach.
24. 9.4 Discuss the advantages and disadvantages of a cost-based transfer pricing approach.
25. 9.4 Discuss the advantages and disadvantages of a negotiated transfer pricing approach.